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"decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:213800JH9QQWHLO99821", "period": "2021-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-534": { "value": "35784000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:213800JH9QQWHLO99821", "period": "2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-535": { "value": "16487000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-13": { "value": "358000000", "decimals": -6, "dimensions": { "concept": "legalandgeneral:UKCorporationTaxIncludedInTaxPaid", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-14": { "value": "368000000", "decimals": -6, "dimensions": { "concept": "legalandgeneral:UKCorporationTaxIncludedInTaxPaid", "entity": "scheme:213800JH9QQWHLO99821", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-15": { "value": "204000000", "decimals": -6, "dimensions": { "concept": "legalandgeneral:WithholdingTaxIncludedInTaxPaid", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-16": { "value": "188000000", "decimals": -6, "dimensions": { "concept": "legalandgeneral:WithholdingTaxIncludedInTaxPaid", "entity": "scheme:213800JH9QQWHLO99821", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-17": { "value": "8000000", "decimals": -6, "dimensions": { "concept": "legalandgeneral:OverseasCoporateTaxRefundIncludedInTaxPaid", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-18": { "value": "8000000", "decimals": -6, "dimensions": { "concept": "legalandgeneral:OverseasCoporateTaxRefundIncludedInTaxPaid", "entity": "scheme:213800JH9QQWHLO99821", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "fact-539": { "value": "1 Basis of preparation Legal & General Group Plc, a public limited company incorporated and domiciled in England and Wales, operates across four broad business areas of retirement, investment management, capital investment and insurance through its subsidiaries and associates in the United Kingdom (UK), the United States and other countries throughout the world. (i) Significant accounting policies The group financial statements have been prepared in accordance with UK-adopted international accounting standards, comprising International Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and related interpretations issued by the IFRS Interpretations Committee. Endorsement is granted by the UK Endorsement Board (UKEB). The group financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment property, available-for-sale financial assets, and certain financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The group has selected accounting policies which state fairly its financial position, financial performance and cash flows for a reporting period. The accounting policies have been consistently applied to all years presented unless otherwise stated. Accounting policies that relate specifically to a balance or transaction are presented above the relevant numerical disclosure. Financial assets and financial liabilities are disclosed gross in the Consolidated Balance Sheet unless a legally enforceable right of offset exists and there is an intention to settle recognised amounts on a net basis. Income and expenses are not offset in the Consolidated Income Statement unless required or permitted by any accounting standard or International Financial Reporting Interpretations Committee (IFRIC) interpretation, as detailed in the applicable accounting policies of the group. (ii) Going concern The group\u2019s business activities, together with the factors likely to affect its future development, performance and position in the current economic environment are set out in this Annual Report and Accounts. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in these consolidated financial statements. Principal risks and uncertainties are detailed on pages 56 to 59. The directors have made an assessment of the group\u2019s going concern, considering both the current performance and the outlook for a period of at least, but not limited to, 12 months from the date of approval of these consolidated financial statements, using the information available up to the date of issue of this Annual Report and Accounts. The group manages and monitors its capital and liquidity, and applies various stresses, including high inflationary scenarios, to those positions to understand potential impacts from market downturns. Our key sensitivities and the impacts on our capital position from a range of stresses are disclosed in section 5.01 of the Full year results in the 2022 Preliminary Management Report 1 . These stresses do not give rise to any material uncertainties over the ability of the group to continue as a going concern. Based upon the available information, the directors consider that the group has the plans and resources to manage its business risks successfully and that it remains financially strong and well diversified. Having reassessed the principal risks and uncertainties (both financial and operational) in light of the current economic environment, as detailed on pages 56 to 59, the directors are confident that the group and company will have sufficient funds to continue to meet its liabilities as they fall due for a period of, but not limited to, 12 months from the date of approval of the financial statements and therefore have considered it appropriate to adopt the going concern basis of accounting when preparing the financial statements. (iii) New standards, interpretations and amendments to published standards that have been adopted by the group The group has applied the following standards and amendments for the first time in its annual reporting period commencing 1 January 2022, which did not give rise to a material impact on the group\u2019s consolidated financial statements. Annual Improvements to IFRS Standards 2018-2020 These amendments, issued in May 2020, make minor amendments to IFRS 1 \u2018First-time Adoption of IFRS\u2019, IFRS 9 \u2018Financial instruments\u2019, IAS 41 \u2018Agriculture\u2019 and the illustrative examples accompanying IFRS 16 \u2018Leases\u2019. Amendments to IAS 16 \u2013 Property, plant and equipment These amendments, issued in May 2020, prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss. Amendments to IAS 37 \u2013 Provisions, contingent liabilities and contingent assets These amendments, issued in May 2020, specify which costs a company includes when assessing whether a contract will be loss-making. Amendments to IFRS 3 \u2013 Business Combinations These amendments, issued in May 2020, update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. 1. Section 5.01 of the Full year results in the 2022 Preliminary Management Report is unaudited. (iv) Standards, interpretations and amendments to published standards which are not yet effective IFRS 17 \u2013 Insurance Contracts and IFRS 9 \u2013 Financial Instruments The group will apply IFRS 17, \u2018Insurance Contracts\u2019 and IFRS 9, \u2018Financial Instruments\u2019 for the first time on 1 January 2023. These standards will bring significant changes to the accounting for insurance and reinsurance contracts and financial instruments and are expected to have a material impact on the group\u2019s financial statements in the period of initial application. (a) Introduction IFRS 17, \u2018Insurance Contracts\u2019 IFRS 17, \u2018Insurance Contracts\u2019 was originally issued in May 2017 by the IASB, and subsequent amendments were issued in June 2020. The standard is effective for annual periods beginning on or after 1 January 2023 following endorsement for use in the UK in May 2022. The standard, which replaces IFRS 4, \u2018Insurance Contracts\u2019, will be applied retrospectively, subject to the transitional options provided for in the standard and provides a comprehensive approach for accounting for insurance contracts including their measurement, income statement presentation and disclosure. The key general principles of IFRS 17 are that an entity: \u2022 Identifies insurance contracts as those under which the entity accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder; \u2022 Separates specified embedded derivatives, distinct investment components and distinct non-insurance goods or services from insurance contracts and accounts for them in accordance with other accounting standards; \u2022 Aggregates the insurance contracts into groups it will recognise and measure (by portfolio, year of inception and profitability); \u2022 Recognises and measures groups of insurance contracts at: \u2013 a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all available information about the fulfilment cash flows; and \u2013 an amount representing the unearned profit in the group of contracts (the contractual service margin or CSM); \u2022 Recognises profit from a group of insurance contracts over the period the group provides insurance coverage. If a group of contracts is expected to be onerous (i.e. loss making) over the remaining coverage period, a loss is recognised immediately; and \u2022 Presents insurance service results (including insurance revenue) separately from insurance finance income or expenses with an accounting policy choice to disaggregate insurance income and expense for the period between profit or loss and other comprehensive income. IFRS 9, \u2018Financial Instruments\u2019 In July 2014, the IASB issued IFRS 9, \u2018Financial Instruments\u2019 which was effective for annual periods beginning on or after 1 January 2018. The standard replaced IAS 39, \u2018Financial Instruments: Recognition and Measurement\u2019. It includes new principles around classification and measurement of financial instruments, introduces an impairment model based on expected credit losses (replacing the current model based on incurred losses) and new requirements on hedge accounting. The IASB subsequently issued \u2018Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts\u2019 which allowed entities which meet certain requirements to defer their implementation of IFRS 9 until adoption of IFRS 17, \u2018Insurance Contracts\u2019 or 1 January 2021, whichever is the earlier. In June 2020, the IASB agreed to extend the temporary exemption in IFRS 4 from applying IFRS 9 to annual reporting periods beginning on or after 1 January 2023. The group has qualified for, and has made use of this deferral option, and will therefore apply IFRS 9 for the first time on 1 January 2023, with a restatement of 2022 comparatives. IFRS 9 classifies financial assets into the following three categories: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The classification of financial assets is based on the entity\u2019s business model for managing them, as well as their contractual cash flow characteristics. With the exception of financial assets measured under fair value through profit or loss (FVTPL), an expected credit loss impairment model applies to all financial assets in scope (including lease receivables and contract assets). The new impairment model requires utilising not only past events and current conditions but also reasonable and supportable forward-looking information, in order to assess the credit risk profiles of those financial assets in scope. Most requirements around financial liabilities in IAS 39 have been retained by IFRS 9, and hedge accounting requirements have been revised by replacing some of the prescriptive rules in IAS 39 with more principle-based requirements, to better align with the entity\u2019s risk management activities. 1 Basis of preparation continued (b) Estimated impacts of the adoption of IFRS 17 and IFRS 9 The group has assessed the estimated impact that the initial application of IFRS 17 and IFRS 9 will have on its consolidated financial statements at the transition date of 1 January 2022. The total adjustment to the group\u2019s equity attributable to owners of the parent is estimated to be a reduction of \u00a35.5bn. The estimated impacts on the key line items in the group\u2019s consolidated balance sheet are set out below: 31 December 2021 (as reported) Adjustments due to adoption of IFRS 9 Adjustments due to adoption of IFRS17 1 January 2022 (restated) Balance Sheet item \u00a3bn \u00a3bn \u00a3bn \u00a3bn Financial investments 538.4 (0.6) \u2013 537.8 Net insurance contract liabilities 1 (82.9) \u2013 (6.2) (89.1) Net deferred tax (liabilities)/assets (0.2) 0.1 1.3 1.2 Other (444.8) \u2013 (0.1) (444.9) Equity attributable to owners of the parent 10.5 (0.5) (5.0) 5.0 1. Net insurance contract liabilities reflect insurance contract assets and liabilities, net of reinsurance contracts. While the adoption of these accounting standards will have an impact on the timing and profile of profit recognition, as communicated at the group\u2019s IFRS 17 investor and analyst event on 29 November 2022, the underlying economics and cash generation of the group\u2019s businesses do not change. The financial impacts noted above will be reflected, where appropriate, in the interim financial statements for the period ending 30 June 2023, and in the group\u2019s Annual Report and Accounts for the year ending 31 December 2023. The financial impacts relating to the periods ending 30 June 2022 and 31 December 2022 have not yet been finalised and are not reasonably estimable for the purpose of inclusion in these consolidated financial statements. (i) Adjustments due to the adoption of IFRS 17 The different timing of profit recognition will result in an increase in liabilities, and therefore decrease in equity attributable to owners of the parent on adoption of IFRS 17. This reflects that a portion of profits previously recognised and accumulated in equity under IFRS 4 will be included in the measurement of the liabilities under IFRS 17. This increase in liabilities can be attributed to the following: Changes from IFRS 4 Estimated impact on net insurance contract liabilities on transition to IFRS 17 \u00a3bn Remeasurement of liabilities: the IFRS 17 cash flows are best estimate and exclude all prudent margins included in the IFRS 4 liabilities. Removal of these margins coupled with other changes to the insurance contract measurement, including discount rates and the exclusion of non-attributable expenses, results in a lower best estimate liability. (7.5) Creation of a risk adjustment \u2013 IFRS 17 incorporates a specific risk adjustment for non-financial risk (which is lower than the prudent margins included within the IFRS 4 liabilities). 2.5 Creation of CSM: determined using the transition approaches described below and reflecting the unearned profit of these contracts. Under IFRS 4 profit could be recognised at inception. 11.2 Total 6.2 (ii) Adjustments due to the adoption of IFRS 9 Upon transition to IFRS 9 on 1 January 2022, the group\u2019s equity attributable to owners of the parent will decrease by c.\u00a30.6bn (before tax). This predominantly reflects the remeasurement of assets following the reclassification of a proportion of financial investments from fair value through profit or loss to amortised cost, in order to better align the accounting treatment of assets that are backing the CSM component of insurance contract liabilities, which is measured at locked-in discount rates under IFRS 17. The application of the expected credit loss impairment requirements does not have a material impact on the group\u2019s equity at the point of transition. (c) Significant accounting policies \u2013 IFRS 17, \u2018Insurance Contracts\u2019 Long term insurance contracts \u2013 initial measurement Insurance contracts are contracts which transfer significant insurance risk to the insurer at the inception of the contract. This is the case if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, other than a scenario which lacks commercial substance. Such contracts remain insurance contracts until all rights and obligations are extinguished or expire. Contracts can be reclassified as insurance contracts after inception if insurance risk becomes significant. Any contracts not considered to be insurance contracts under IFRS 17 are classified as investment contracts and are measured under IFRS 9. The scope of IFRS 17 is very closely aligned to IFRS 4. All of the group\u2019s in scope insurance contracts are accounted for under the general measurement model which measures a group of insurance contracts as the total of: \u2022 fulfilment cash flows; and \u2022 a CSM representing the unearned profit the group will recognise as it provides services under the insurance contract. Fulfilment cash flows Fulfilment cash flows comprise unbiased and probability-weighted estimates of future cash flows, discounted to present value to reflect the time value of money and financial risks, plus a risk adjustment for non-financial risk. The group\u2019s objective in estimating future cash flows is to determine the expected value, or the probability weighted mean, of the full range of possible outcomes, considering all reasonable and supportable information available at the reporting date without undue cost or effort. The group estimates future cash flows considering a range of scenarios which have commercial substance and give a good representation of possible outcomes. The cash flows from each scenario are probability-weighted and discounted using current assumptions. When estimating future cash flows, the group includes all cash flows that are within the contract boundary. The contract boundary for the group\u2019s contracts is very closely aligned with that applied under IFRS 4. The cash flows include: \u2022 premiums and related cash flows; \u2022 claims and benefits, including reported claims not yet paid, incurred claims not yet reported and expected future claims; \u2022 investment management costs incurred in the provision of an investment return service or to enhance the benefits of an insurance contract; \u2022 payments to policyholders resulting from embedded surrender value options; \u2022 an allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs; \u2022 claims handling costs; \u2022 policy administration and maintenance costs, including recurring commissions that are expected to be paid to intermediaries; \u2022 an allocation of fixed and variable overheads directly attributable to fulfilling insurance contracts; and \u2022 transaction-based taxes. The group incorporates, in an unbiased way, all reasonable and supportable information available without undue cost or effort about the amount, timing and uncertainty of those future cash flows. The group estimates the probabilities and amounts of future payments under existing contracts based on information obtained, including: \u2022 information about claims already reported by policyholders; \u2022 other information about the known or estimated characteristics of the insurance contracts; \u2022 historical data about the group\u2019s own experience, supplemented when necessary, with data from other sources. Historical data is adjusted to reflect current conditions; and \u2022 current pricing information, when available. The measurement of fulfilment cash flows-includes insurance acquisition cash flows which are allocated as a portion of premium to profit or loss (through insurance revenue) over the period of the contract. Risk adjustment The risk adjustment for non-financial risk for a group of insurance contracts reflects the compensation that the group would require for bearing uncertainty about the amount and timing of the cash flows that arises from non-financial risk after diversification. We have calibrated the group\u2019s risk adjustment using a Value at Risk (VAR) methodology. The total group risk adjustment at transition was \u00a32.5bn. Discounting The insurance contract fulfilment cash flows are discounted at rates that reflect the characteristics of the insurance contract liabilities. These have been determined using the top-down approach, starting from an appropriate asset portfolio with deductions to remove risks in the assets that are not present in the insurance liabilities. As is the case under IFRS 4, the discount rate is a key determinant of the measurement of the insurance liability, particularly for annuity business. At transition, the average credit default deduction was c.41bps compared with c.43bps under IFRS 4. Contractual service margin The group\u2019s CSM is a component of the asset or liability for the group of insurance contracts that represents the unearned profit the group will recognise as it provides services in the future. The group measures the CSM on initial recognition at an amount that, unless the group of contracts is onerous, results in no income or expenses arising from: \u2022 initial recognition of the fulfilment cash flows; \u2022 any cash flows arising from the contracts in the group at that date; \u2022 the derecognition at the date of initial recognition of: \u2013 any asset for insurance acquisition cash flows; and \u2013 any other asset or liability previously recognised related to the group of insurance contracts. Aggregation The level of aggregation determines the unit of account at which IFRS 17 calculations are performed. This is determined firstly by dividing the business written into portfolios. Portfolios comprise groups of contracts with similar risks which are managed together. Portfolios are further divided based on expected profitability at inception into three categories: onerous contracts, contracts with no significant risk of subsequently becoming onerous, and the remainder. IFRS 17 also requires that no group for level of aggregation purposes may contain contracts issued more than one year apart. 1 Basis of preparation continued Onerous contracts For groups of contracts assessed as onerous, the group recognises a loss in profit or loss for the net outflow, resulting in the carrying amount of the liability for the group being equal to the fulfilment cash flows and the CSM of the group being zero. A loss component is established by the group for the liability for remaining coverage for an onerous group, which represents the losses recognised. Long term insurance contracts \u2013 subsequent measurement The group measures the carrying amount of a group of insurance contracts at the end of each reporting period as the sum of: (i) the liability for remaining coverage comprising fulfilment cash flows related to future service allocated to the group at that date and the CSM of the group at that date; and (ii) the liability for incurred claims for the group reflecting the fulfilment cash flows related to past service allocated to the group at that date. Contractual service margin \u2013 measurement The CSM at the end of the reporting period represents the profit in the group of insurance contracts that has not yet been recognised in profit or loss, because it relates to future service to be provided. For a group of insurance contracts the carrying amount of the CSM of that group at the end of the reporting period equals the carrying amount at the beginning of the reporting period adjusted, as follows: \u2022 the effect of any new contracts added; \u2022 interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates at initial recognition; \u2022 the changes in fulfilment cash flows relating to future service, except to the extent that: \u2013 such increases in the fulfilment cash flows exceed the current carrying amount of the CSM, giving rise to a loss; or \u2013 such decreases in the fulfilment cash flows are allocated to the loss component of the liability for remaining coverage; \u2022 the amount recognised as insurance revenue because of the transfer of services in the period, determined by allocation of the contractual service margin at the end of the period over the current and remaining coverage period; and \u2022 the effect of any currency exchange differences on the CSM. The changes in fulfilment cash flows relating to future service that adjust the CSM comprise of: \u2013 experience adjustments that arise from the difference between the premium receipts (net of refunds) and any related cash flows such as insurance acquisition cash flows and insurance premium taxes and the estimate, at the beginning of the period, of the amounts expected. Differences related to premiums received (or due) in respect of current or past services are recognised immediately in profit or loss while differences related to premiums received (or due) for future services are adjusted against the CSM; \u2013 changes in estimates of the present value of future cash flows in the liability for remaining coverage, except those relating to the time value of money and changes in financial risk (which are recognised in the statement of profit or loss and other comprehensive income rather than adjusting the CSM); \u2013 differences between any investment component expected to become payable in the period and the actual investment component that becomes payable in the period; and \u2013 changes in the risk adjustment for non-financial risk that relate to future service. Adjustments to the CSM noted above are measured at discount rates that reflect the characteristics of the cash flows of the group of insurance contracts at initial recognition (i.e. the weighted average of the rates applicable at the date of initial recognition of contracts that joined a group over a 12-month period). Onerous contracts Groups of contracts that were not onerous at initial recognition can also subsequently become onerous if assumptions and experience changes. The group establishes a loss component for any onerous group depicting the future losses recognised. The loss component is released based on a systematic allocation of the subsequent changes in the fulfilment cash flows to: (i) the loss component; and (ii) the liability for remaining coverage excluding the loss component. The loss component is also updated for subsequent changes in estimates of the fulfilment cash flows related to future service. The systematic allocation of subsequent changes to the loss component results in the total amounts allocated to the loss component being equal to zero by the end of the coverage period of a group of contracts (since the loss component will have materialised in the form of incurred claims). The loss component ensures that over the duration of the contract, the correct amounts are recognised as insurance revenue and insurance service expenses. Contractual service margin \u2013 recognition The amount of contractual service margin recognised in the income statement for a group of insurance contracts reflects the insurance contract services provided. The proportion of the CSM earned is calculated as the amount of coverage units provided in the period divided by the sum of all the future and current period coverage units. The group has elected to discount the future coverage units in this calculation. The table below indicates the main insurance contracts services provided under the group\u2019s insurance contracts and selected coverage unit(s) used to measure those services. Insurance contract Insurance service Coverage unit(s) Immediate annuity Payment of insurance claims Expected annual claims payments Deferred annuity \u2022 Payment of insurance claims (payment phase) \u2022 Investment return service (deferral phase) \u2022 Lump sum death benefits (deferral phase) \u2022 Expected annual claims payments \u2022 Expected investment return on backing assets \u2022 Sum assured Longevity swaps Payment of floating leg of swap Expected annual floating leg payments Retail Protection Potential mortality or morbidity claims Sum assured Group Protection Potential mortality or morbidity claims Sum assured Where a specific unit of account contains a mixture of services, and therefore coverage units, it is necessary to weight the coverage units so that the resulting profile of CSM release reflects the overall package of benefits provided. This is particularly pertinent to units of account incorporating a combination of immediate and deferred annuities. Under IFRS 17, deferred annuities usually provide multiple services, split between the two phases of benefit provision (the deferral phase and the payment phase). Significant judgement is therefore required to combine the different coverage units so that they fairly reflect the services provided. The weighting between the deferral phase and the payment phase coverage units is calculated so that the services provided in the deferral phase reflect the investment return provided and the probability weighted delivery of any lump sum death benefits, both adjusted to target that all of the CSM is earned in the deferral phase for all contracts which do not enter the payment phase either through transfer out, withdrawal of funds or death. Earning the CSM over the coverage period will slow down profit recognition for annuities in comparison to IFRS 4 which allowed the recognition of profit on inception and more closely linked revenue recognition to risk release rather than the provision of service. Investment components Investment components will not be included in insurance revenue and insurance service expenses under IFRS 17. As a result, revenue from some annuity and universal life contracts will be reduced in comparison with the premium recognised under IFRS 4. The group will identify the investment component of a contract by determining the amount that it would be required to repay to the policyholder in all scenarios with commercial substance. Insurance finance income and expense IFRS 17 requires an accounting policy decision as to whether to recognise all finance income or expense in profit or loss, or whether to disaggregate the income or expense that relates to changes in financial assumptions into other comprehensive income. All finance income and expense will be included in profit or loss except for protection business where this will be disaggregated. Reinsurance contracts held The measurement of reinsurance contracts held follows the same principles as those for insurance contracts issued, with the exception of the following: \u2022 measurement of the cash flows includes an allowance on a probability-weighted basis for the effect of any non-performance by the reinsurers, including the effects of collateral and losses from disputes; \u2022 the group determines the risk adjustment for non-financial risk so that it represents the amount of risk being transferred to the reinsurer; \u2022 both day 1 gains and day 1 losses are not recognised at initial recognition in the statement of financial position but are deferred into CSM and released to profit or loss as the reinsurer renders services, except for any portion of a day 1 loss that relates to events before initial recognition; \u2022 if the reinsurance contract is recognised prior to a loss-making underlying contract, the reinsurance CSM can be adjusted to offset a portion of the inception loss (the loss recovery component); and \u2022 subsequent changes in the fulfilment cash flows are recognised in profit or loss if the related changes arising from the underlying ceded contracts are recognised in profit or loss. Alternatively, changes in the fulfilment cash flows adjust the CSM. Transition On transition to IFRS 17, the group has applied the fully retrospective approach unless impracticable. The full retrospective approach requires the group to: \u2022 identify, recognise and measure each group of insurance and reinsurance contracts as if IFRS 17 had always applied; \u2022 derecognise any existing balances that would not exist had IFRS 17 always applied; and \u2022 recognise any resulting net difference in equity. If it was impracticable to apply a full retrospective approach to a group of contracts then the group has chosen between the modified retrospective approach and the fair value approach. If the group could not obtain reasonable and supportable information necessary to apply the modified retrospective approach, then the fair value approach has been chosen. 1 Basis of preparation continued The group has applied the following transition approaches to its material insurance contract portfolios on transition to IFRS 17, by year of issue: Transition Approach Annuities UK Protection US Protection Full retrospective 2021 2021 2021 Modified retrospective 2016-2020 2012-2020 2011-2020 Fair value Pre-2016 Pre-2012 Pre-2011 Full retrospective approach The full retrospective approach has been determined to be impracticable where the effects of retrospective application are not determinable because information required has not been collected (or not with sufficient granularity), application would require the application of hindsight, or information is unavailable because of system migrations, data retention requirements or other reasons. Specific examples include: \u2022 historic calibration of IFRS 17 specific judgements, such as the scale of the risk adjustment; \u2022 expectations about a contract\u2019s profitability and risks of becoming onerous required for identifying groups of contracts; \u2022 information about historical cash flows and discount rates required for determining the estimates of cash flows on initial recognition and their subsequent changes on a retrospective basis; \u2022 information required to allocate fixed and variable overheads to groups of contracts, because the group\u2019s current accounting policies do not require such information; and \u2022 information about certain changes in assumptions and estimates because they were not documented on an ongoing basis. Modified retrospective approach The objective of the modified retrospective approach is to achieve the closest outcome to retrospective application possible using reasonable and supportable information available without undue cost or effort. The only modification applied by the group is that for some groups of contracts issued before 2020, the risk adjustment for non-financial risk on initial recognition will be determined by adjusting the amount at 1 January 2022 for the expected release of risk before that date. The expected release will be determined with reference to the release of risk of similar contracts that the group issued in 2022. This modification has been used to avoid the application of hindsight to the calibration of the risk adjustment in prior periods. Fair value approach The group has applied the fair value approach on transition for certain groups of contracts as, prior to transition, it grouped contracts from multiple cohorts and years into a single unit for accounting purposes. Obtaining reasonable and supportable information to apply the full retrospective approach was impracticable without undue cost or effort. The group has determined the CSM of the liability for remaining coverage at the transition date, as the difference between the fair value of the group of insurance contracts and the fulfilment cash flows measured at that date. In determining fair value, the group has applied the requirements of IFRS 13, \u2018Fair Value Measurement\u2019, except for the demand deposit floor requirement. The fair value attributed to the in-scope annuity business is calculated with reference to a price generated using the group\u2019s pricing models and pricing assumptions at the transition date. This incorporates an expected internal rate of return that has been validated against relevant market transactions. The group has aggregated contracts issued more than one year apart in determining groups of insurance contracts under the fair value approach at transition. The group did not have reasonable and supportable information to aggregate groups into those including only contracts issued within one year. For portfolios of protection contracts, the group has elected to disaggregate insurance finance income or expenses between amounts included in profit or loss and amounts included in other comprehensive income. For these portfolios, the cumulative amount of insurance finance income or expense recognised in other comprehensive income at the transition date and has been reset to zero in line with the provisions of the standard. (d) Significant accounting policies \u2013 IFRS 9, \u2018Financial Instruments\u2019 Financial assets \u2013 classification and measurement The classification and measurement of financial assets depends on their contractual cash flow characteristics and how they are managed (the entity\u2019s business model). The contractual cash flow characteristics test aims to identify those assets with cash flows consistent with a basic lending arrangement, i.e. which are \u2018solely payments of principal and interest\u2019 (SPPI). The business model test refers to how an entity manages its financial assets with the objectives of generating cash flows. These factors determine whether the financial assets are measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss. Assets are therefore typically characterised as follows: \u2022 amortised cost: financial assets with contractual terms that give rise solely to interest and principal cash flows and which are held in a business model whose objective is to hold the assets to collect their cash flows; \u2022 fair value through other comprehensive income (FVOCI): financial assets with contractual terms that give rise solely to interest and principal cash flows and which are held in a business model whose objective is achieved by holding the assets to collect their cash flows and selling them; \u2022 FVTPL: all other financial assets. Notwithstanding the above, on initial recognition the group may irrevocably designate to FVTPL a financial asset that would otherwise be measured at amortised cost or FVOCI if doing so eliminates or greatly reduces an accounting mismatch. Additionally, on initial recognition of an equity investment not held for trading the group may irrevocably elect to present its subsequent changes in fair value through other comprehensive income. Based on the new requirements, IFRS 9 will affect the classification and measurement of financial assets as follows: \u2022 financial assets continuing to be measured at FVTPL: \u2013 equity investments, measured at FVTPL under IAS 39, will continue to be measured at FVTPL under IFRS 9; \u2013 derivative assets are held for trading instruments under both IAS 39 and IFRS 9, and will therefore continue to be measured at FVTPL, unless designated as hedging items as part of a hedge accounting relationship; \u2013 debt instruments backing annuity liabilities, including surplus assets, are currently accounted for at FVTPL as they are managed on a fair value basis. Most of these will retain the same measurement under IFRS 9 as their business model does not naturally fit a \u2018held to collect\u2019 or \u2018held to collect and sell\u2019 business model, irrespective of their contractual cash flows characteristics; and \u2013 other debt securities backing investment contract liabilities and surplus shareholder assets will continue to be accounted for at FVTPL as they are managed on a fair value basis, consistent with their IAS 39 measurement. \u2022 financial assets remeasured to amortised cost or FVOCI: \u2013 as the date of transition to IFRS 9 for the group is the same as that for IFRS 17, the group has reassessed the classification and measurement of certain financial assets backing annuities liabilities, in order to better match interest rate and inflation sensitivities to IFRS 17 liabilities. This is because, while the Annuities best estimate liability and risk adjustment under IFRS 17 are measured with current financial assumptions, the CSM is measured with locked-in discount rates. Therefore, a sub-portfolio of long dated debt instruments backing annuity contracts but in surplus to the IFRS 17 best estimate liability and risk adjustment, and passing the SPPI test, was separately identified. These assets will be used to manage interest and inflation rate exposure. They will be held to maturity in a \u2018held to collect\u2019 business model and accounted for at amortised cost; and \u2013 assets backing protection liabilities are measured at FVTPL under IAS 39. Based on the IFRS 9 criteria, these assets pass the SPPI test and will be measured at amortised cost or FVOCI, depending on their business model. \u2022 receivable balances are accounted for at amortised cost under both IAS 39 and IFRS 9. Financial assets \u2013 impairment IFRS 9 replaces the incurred losses impairment model in IAS 39 with a new impairment model, based on expected credit losses (ECLs). The new impairment model applies to the group\u2019s financial assets measured at amortised cost or FVOCI, as well as lease receivables in scope of IFRS 16 \u2018Leases\u2019 and contract assets in scope of IFRS 15 \u2018Revenue from Contracts with Customers\u2019. Under IFRS 9, expected credit losses are defined as the present value of the difference between all contractual cash flows that are due and all cash flows that the entity expects to receive (i.e. the cash shortfall), weighted based on their probability of occurrence. The loss allowance recognised under the new standard can be equal to an amount corresponding to a 12-month ECL or a lifetime ECL. A lifetime ECL is the ECL resulting from all possible default events over the expected life of the financial asset; a 12-month ECL is the portion of lifetime ECL resulting from default events on a financial asset that are possible within the 12 months after the reporting date. The ECL model is run from the date of initial recognition of a financial asset, and its output updated at every reporting period, even if no actual loss events have taken place. The impact of updating the inputs of the ECL model in the reporting period is recognised in profit or loss directly where it affects the carrying value of financial assets at amortised cost, while for assets at FVOCI an equal and opposite movement is recorded in other comprehensive income. In order to determine whether the group measures ECLs at an amount equal to 12-month ECL or lifetime ECL, at each reporting period the group is required to assess which \u2018stage\u2019 a financial asset falls into. Stages reflect the general pattern of deterioration in credit risk of a financial instrument that ultimately defaults, as follows: \u2022 Stage 1 includes financially healthy financial assets that are expected to perform in line with their contractual terms, and which have no signs of increased credit risk; \u2022 when the credit risk of a certain financial asset has significantly increased since initial recognition, the instrument no longer falls into Stage 1. In that case, if the instrument is not credit-impaired, the instrument will fall into Stage 2; and \u2022 Stage 3 applies to credit-impaired financial instruments. When financial assets are under Stage 1, 12-month ECLs are recognised. When financial assets are under Stage 2 or 3, lifetime ECLs are recognised. An instrument moves down (or up) the stages when a significant increase in credit risk (SICR) has happened (or has reversed). When determining whether the credit risk of a financial instrument has increased significantly since initial recognition, the group considers reasonable and supportable information, both qualitative and quantitative, that is relevant and is available without undue cost or effort, including forward-looking information at its disposal. The provisions of IFRS 9 include a rebuttable presumption that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, which is taken into account for this assessment. Additionally, the group makes use of a practical expedient available in IFRS 9 whereby it can be assumed that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date (e.g. investment grade as determined by the group\u2019s asset managers). This allows recognition of 12-month ECLs as opposed to, potentially, lifetime ECLs. The group estimates ECLs on its financial investments at amortised cost and debt instruments at FVOCI by using the probability of default approach. Based on this method, the ECLs are a probability-weighted estimate of the present value of estimated cash shortfalls, i.e. the weighted average of credit losses, with the respective risks of a default occurring used as the weightings. For this purpose, the key elements to be calculated are the Probability of Default (PD), i.e. the estimate of the likelihood of default over a given time horizon (either 12 months or lifetime); the respective Loss Given Default (LGD); and the Exposure at Default (EAD). 1 Basis of preparation continued In order to determine 12-month or lifetime PDs the group\u2019s models utilise historical data obtained from S&P and Moody\u2019s in order to evaluate transitions (i.e. the probability that a security changes rating in a given year) and defaults, plus scenario-specific annual scaling factors which adjust the PDs for forward-looking information. The final PDs produced by the model are unconditional, i.e. they incorporate both the probability of not defaulting until the start of the period, and the subsequent probability of default in that period, conditional on the position not having defaulted to that point. This allows them to be summed over 12 months to provide 12-month PD estimates, or over all remaining months to produce lifetime PD estimates. LGD is the magnitude of the likely loss if there is a default, based on the history of recovery rates of claims against defaulted counterparties, and taking into account collateral values where applicable. EAD represents the expected exposure in the event of a default, based on the current exposure to the counterparty and potential changes to the current amount allowed under the contract. Finally, the group has adopted a simplified approach for trade receivables, contract assets and finance and operating lease receivables. This allows measurement of lifetime ECLs only, thereby removing the need to identify SICRs. For these balances, the group makes use of provision matrices in order to calculate such lifetime ECLs. This is a practical expedient allowed by IFRS 9 whereby historical credit loss experience and fixed loss rates are applied to the balances outstanding. Where possible, historical loss rates are adjusted to allow for forward looking information. Owing predominantly to the high credit rating across the group\u2019s financial assets in scope of the new impairment model, the calculation of ECLs as at the date of initial application of IFRS 9 did not give rise to a material impact. Financial liabilities IFRS 9 largely retains the requirements of IAS 39 for the classification and measurement of financial liabilities, which can be at either amortised cost or FVTPL. In contrast with IAS 39, under IFRS 9 the amount of fair value changes for financial liabilities at FVTPL attributable to changes in the credit risk of the liability is presented in other comprehensive income. However, if this treatment creates, or enlarges, an accounting mismatch in profit or loss, the group must present all gains or losses for that liability (including the effects of changes in the credit risk of that liability) in profit or loss. The new requirements for financial liabilities did not affect the group\u2019s classification and measurement of its instruments. Hedge accounting When initially applying IFRS 9, the group may choose to either continue to apply hedge accounting requirements in IAS 39 or move to the new IFRS 9 principles. The group will update its accounting policies to adopt IFRS 9 requirements. These requirements are better aligned with the risk management activities of the group and therefore it is expected that going forward more risk management strategies will qualify for hedge accounting. Changes to hedge accounting requirements are not currently expected to have a significant impact on the group\u2019s results. Transition On transition, changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively. For the group, IFRS 9 has a date of initial application of 1 January 2023, which coincides with the implementation with IFRS 17. On initial application, while IFRS 17 requires the presentation of at least one restated comparative period, IFRS 9 permits, but does not require, restatement of comparative periods. In line with IFRS 17 the group has chosen to restate comparative periods under IFRS 9. While the standard does not apply to financial assets already derecognised by 1 January 2023, the group has applied a \u2018classification overlay\u2019 introduced by the IASB per an amendment to IFRS 17 entitled \u2018Initial Application of IFRS 9 and IFRS 17 \u2013 Comparative Information\u2019. This allows an entity applying IFRS 17 and IFRS 9 at the same time to present comparative information as if the classification, measurement and impairment requirements of IFRS 9 had been applied to them, irrespective of derecognition date. From a classification and measurement perspective, financial assets\u2019 business models have been assessed as at the date of initial application and were applied consistently in all periods presented. If an asset was in scope of the classification overlay described above, the group aligned the classification and measurement of each financial asset in the comparative periods with what it expected it would have been on 1 January 2023. Such assessment was performed based on reasonable and supportable information available at 1 January 2022, the transition date. Any difference between the IAS 39 carrying amount of a financial asset and the carrying amount at the transition date that results from applying IFRS 9 or the classification overlay was recognised in opening retained earnings. With regards to impairment, similarly to classification and measurement, the group assessed whether as at 1 January 2023 there had been a SICR as compared to the date that a financial instrument was initially recognised, and applied a 12-month or lifetime ECL accordingly. The group chose to apply the impairment requirements of IFRS 9 consistently to all of the applicable financial instruments on its books during the comparative periods. To the extent the classification overlay applied and therefore an asset was derecognised by 1 January 2023, any expected credit losses recognised in the comparative periods were reversed upon disposal. The low credit risk practical expedient described previously was also available for the purpose of transition, and the group made use of this in line with set criteria. On transition to IFRS 9, any additional provision recognised when compared to IAS 39 was recognised in opening retained earnings. However, if this related to a financial asset at FVOCI, an equal and opposite movement was reflected in the OCI reserve. Amendments to IAS 1 \u2013 Presentation of Financial Statements and IFRS Practice Statement 2: \u2018Making Materiality Judgements: Disclosure of Accounting Policies\u2019 These amendments, issued in February 2021, intend to help preparers in deciding which accounting policies to disclose in their financial statements, by applying materiality judgements. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group is currently revisiting its accounting policy disclosures to ensure compliance and consistency with the new requirements. Amendments to IAS 8 \u2013 Accounting policies, Changes in Accounting Estimates and Errors: \u2018Definition of Accounting Estimates\u2019 These amendments, issued in February 2021, aim to help entities to distinguish between accounting policies and accounting estimates. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group does not expect the impact to be significant. Amendments to IAS 12 \u2013 Income Tax: \u2018Deferred Tax related to Assets and Liabilities arising from a Single Transaction\u2019 These amendments, issued in May 2021, clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group does not expect the impact to be significant. Amendments to IAS 1 \u2013 Presentation of Financial Statements: \u2018Classification of Liabilities as Current or Non-Current\u2019 These amendments, issued in January 2020, clarify the existing requirements for classifying liabilities as current or non-current. The amendments are effective for annual reporting periods beginning on or after 1 January 2024, subject to UK endorsement. Amendments to IAS 1 \u2013 Presentation of Financial Statements: \u2018Non-current Liabilities with Covenants\u2019 These amendments, issued in October 2022, clarify that only covenants with which an entity must comply on or before the reporting date will affect a liability\u2019s classification as current or non-current. The amendments are effective for annual reporting periods beginning on or after 1 January 2024, subject to UK endorsement. Amendments to IFRS 16 \u2013 Leases: \u2018Lease Liability in a Sale and Leaseback\u2019 These amendments, issued in September 2022, specify requirements for seller-lessees to measure the lease liability in a sale and leaseback transaction. The amendments are effective for annual reporting periods beginning on or after 1 January 2024, subject to UK endorsement. (v) Critical accounting policies and the use of estimates The preparation of the financial statements includes the use of estimates and assumptions which affect items reported in the Consolidated Balance Sheet and Consolidated Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management\u2019s best knowledge of current circumstances and future events and actions, material adjustments could be made to the carrying amounts of assets and liabilities within the next financial year. The Audit Committee reviews the reasonableness of judgements associated with and the application of significant accounting policies. The significant accounting matters considered by the Audit Committee in respect of the year ended 31 December 2022 are included within the Audit Committee Report on page 88. The major areas of critical accounting judgement on policy application are considered below: Insurance and investment contract liabilities (Notes 20 and 21): Product classification and the assessment of the significance of insurance risk transferred to the group in determining whether a contract should be accounted for as an insurance or investment contract. Contracts which transfer significant insurance risk to the group are classified as insurance contracts. Contracts that transfer financial risk (e.g. change in interest rate or security price) to the group but not significant insurance risk are classified as investment contracts. Judgement is required in order to assess the significance of the transfer of insurance risk within a contract. This assessment is based on whether the occurrence of an insured event could cause the group to make significant additional payments, i.e. if the occurrence of the event causes significantly higher cash out flows for the group than its non-occurrence. Certain contracts, which are both insurance and investment, can contain discretionary participating features representing the contractual right to receive additional benefits as a supplement to guaranteed benefits under certain conditions, being: \u2022 that the additional benefits are a significant portion of the total contractual benefits; \u2022 the amount and timing of the additional benefits is at the discretion of the group; and \u2022 that the additional benefits are contractually dependent upon the performance of a company, fund or specified pool of assets. Insurance contracts and investment contracts with such discretionary participation features are accounted for under IFRS 4, while investment contracts without discretionary participation features are accounted for as financial instruments under IAS 39. Judgement is therefore required in order to establish whether any additional benefits in an insurance or investment contract meet the above requirements for being considered discretionary participation features. 1 Basis of preparation continued Consolidation (Notes 42 to 44): Assessment of whether the group controls underlying entities and should therefore consolidate them. The assessment takes account of various criteria, including decision making ability, equity holding and the rights to a variable return from the entity. Control arises when the group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. For operating entities this generally accompanies a shareholding of 50% or more in the entity. Subsidiaries that are consolidated where the group owns less than 50% of the ordinary share capital (structured entities), are consolidated based on an assessment of control normally arising from special rights attaching to the class of share owned, other contractual arrangements and factors such as the purpose of the investee, the nature of its relevant activities, voting rights (including potential voting rights) and substantive and protective rights. The group invests in various fund and unit trust entities where it also acts as the asset manager to those entities. In these instances, in determining whether the group controls the entities, the assessment focuses on the aggregate economic interests of the group (direct interest and expected management fees) and on whether the group acts as a principal or agent. This includes an assessment of the removal rights of other investors (their practical ability to allow the group not to control the fund). Additionally, holdings in such investments can fluctuate on a daily basis according to the participation of the group and other investors in them. As a result, in determining control, we look at an assessment of these factors over a longer period to mitigate the impact of daily fluctuations which do not reflect the wider facts and circumstances of the group\u2019s involvement. This is performed in line with the following principles: \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity exceeds 50%, the group is judged to have control over the entity; \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity is between 30% and 50%, the facts and circumstances of the group\u2019s involvement in the entity are considered, including the rights to any fees earned by the asset manager from the entity, in forming a judgement as to whether the group has control over the entity; and \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity is less than 30%, the group is judged to not have control over the entity, but again the facts and circumstances of the group\u2019s involvement in the entity are considered. The following sets out information about the critical accounting assumptions made by the group about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year : Valuation of insurance and investment contract liabilities (Notes 18 to 21) The key judgements around the valuation of insurance and investment contract liabilities relate to the following assumptions: \u2022 Determination of the longevity, mortality and morbidity assumptions used in the calculation of the insurance contract liabilities; the assumptions for the rate of future longevity, mortality and morbidity are based on the group\u2019s internal experience and judgements about how experience may vary in the future. This assessment takes into account market benchmarking, internal experience studies and independent industry data. \u2022 Determination of the expense assumptions used in the calculation of the insurance liabilities. These represent the expected future costs of administering the underlying insurance policies, and are based on management\u2019s best estimate of these future costs, and on an appropriate allocation between servicing new and existing business. \u2022 Determination of valuation interest rates used to discount the liabilities, which are sensitive to the assumptions made, for example, on credit default of the backing assets. These assumptions take into account consideration of market experience and historic internal data. The valuation interest rate is also sensitive to the selection of assets chosen to back the liabilities. \u2022 Determination of the target long-term asset portfolio at certain period ends, depending on the quantum and timing of pension risk transfer (PRT) volumes. This assumption is used to present LGRI and Retail Retirement new business metrics. Insurance and investment contract liabilities are of a long-term nature, and as such, the ultimate impact of Covid-19 will emerge over a long period of time. As at 31 December 2022, there was insufficient certainty in more recent data to revise long-term assumptions in response to emerging claims experience relating to the effects of the pandemic, with the exception of certain short-term allowances in protection contracts. Note 19 includes a sensitivity analysis on pre-tax group profit and group equity to reasonable alternative assumptions. Valuation of unquoted illiquid assets and investment property (Note 10) \u2022 Determination of fair value of unquoted and illiquid assets, and investment property involves judgements in model valuations, through the incorporation of both observable and unobservable market inputs, which include assumptions that lead to the existence of a range of plausible valuations for financial assets. In assessing asset valuation, in line with applicable standards and guidance, the group has both projected the short-term impact on earnings and cash flows of the current market volatility, while continuing to review the assets\u2019 ability to deliver longer term returns aligned to their investment cases. Note 10 includes a sensitivity analysis on the fair value of unquoted illiquid assets and investment property to reasonable alternative assumptions . Defined benefit pension plan (Note 23) \u2022 Determination of pension plan assumptions including mortality, discount rates and inflation; these assumptions have been set in accordance with the requirements of IAS 19, \u2018Employee Benefits\u2019 and include consistent judgements with those in setting the annuity liabilities where possible. Note 23 includes a sensitivity analysis to reasonable alternative assumptions. (vi) Consideration of climate change The group is exposed to climate change through two broad categories: transition risks from the move to a low-carbon economy and the impact this has on asset valuation and the economy; and physical risks from the impact on asset holdings as a result of severe weather events and longer-term shifts in climate. The group has integrated climate risk management into its governance framework and has carried out a detailed assessment of how we could expect climate risk to emerge across our business model. The group risk mitigation strategy includes setting portfolio carbon intensity targets, integrating carbon controls into the investment processes through stock exclusions and high carbon escalation, corporate engagement and implementing high energy efficiency standards into the group\u2019s directly owned commercial property and housing businesses. The group is committed to net zero, targeting a 1.5\u00b0C \u2018Paris\u2019 outcome. In order to meet its environmental goals, the group has set for itself a number of metrics and targets, clearly linked with its business strategy and risk management controls. These are based on a three-pillar climate strategy encompassing \u2018Invest, Influence and Operate\u2019. Metrics and targets have been defined around the group\u2019s operational carbon footprint, investment portfolio economic carbon intensity, and implied portfolio temperature alignment. These are being targeted through the decarbonisation of the group\u2019s balance sheet, investments in clean energy and start-ups, development of climate friendly investment products, and focus on own operations. The group also continues to use its influence as a large investor to promote the transition. Scenario analysis is performed to help understand the strategic implications of possible climate pathways, including the key features of a transition to a net zero economy. Plausible scenarios have been developed based on estimations of how the energy system may evolve over the next 30 years, using the most recent carbon budgets from the Intergovernmental Panel on Climate Change\u2019s Sixth Assessment Report (AR6) and incorporate latest data on technology costs. These include two different pathways to \u2018below 2\u00b0C\u2019, and a scenario assuming achievement of net zero. Given the group\u2019s long-term climate risk relates to transition risk, a fourth scenario assuming global failure to act on climate change and emissions growth at historical rates has been modelled, but the impacts have not been applied to our portfolio. Such impacts are driven by physical risks which tend to be highly localised and manifest further into the future and are therefore more uncertain. In preparing the consolidated financial statements, the group has considered the impact of climate change, and in particular the transition to a lower carbon economy, on the valuation of the group\u2019s asset and liabilities. In the strategic report, and more fully in the group\u2019s climate report, we have set out in detail the various risks and opportunities that are created by this transition, and how they may impact the group across various time horizons. In the group\u2019s climate report, in line with the recommendations of the Task Force on Climate-related Financial Disclosures, we have further described the resilience of the group\u2019s strategy, taking into consideration different climate-related scenarios, as described above. There is no one single scenario that underpins the financial statements. The scenarios help challenge the group\u2019s perspectives on the future business and economic environment as a result of the transition to a lower carbon economy, including consideration of events that may be only remotely possible. As a result, scenarios included in the group\u2019s climate report are not intended to be predictions of likely future events or outcomes and are not the basis on which the group\u2019s consolidated financial statements have been prepared. At the current time, the group does not consider climate risk to represent a significant area of judgement or of estimation uncertainty. As at 31 December 2022, no material impacts on the group\u2019s financial position, nor on the valuation of assets or liabilities on the group\u2019s Consolidated Balance Sheet as a result of climate change risk have been identified. In arriving at this determination, the group has in particular taken into account the following areas of judgement, which we consider to be those most exposed to the potential impact of climate change in the preparation of the financial statements: Going concern and viability In preparing the consolidated financial statements, the directors are required to assess the group\u2019s ability to continue as a going concern, by taking into account all available information related to at least 12 months from the date of their approval. Additionally, the preparation of the viability statement takes into consideration the group\u2019s overall business model and strategy, forecast financial strength and resilience, and the liquidity profile over the planning horizon. Climate-related matters have been considered as part of these assessments and have not been deemed to create material uncertainties as to their conclusions or to require specific disclosure. Valuation of Level 3 financial investments and investment property The valuation of unquoted illiquid assets and investment property has been separately identified as an area of significant estimation uncertainty. The assumptions used in the models underpinning these assets\u2019 valuations, such as cash flows forecasts, discount rates, and multiples, are often unobservable. Due to the need to apply significant judgements, these assumptions can be impacted by transition risk, with climate-related inputs gaining more traction (e.g. construction methods and materials, EPC ratings, ESG credentials and climate resilience). This is particularly relevant for the group\u2019s direct investments portfolio, including alternative assets. Where possible, the group\u2019s assets are valued using standard market pricing sources or appropriately qualified external valuers, and therefore reflect current market sentiments around climate risk. In this respect market and investor expectations have also been evolving, with greater demand towards net zero-aligned assets, and away from traditional carbon-intensive methods, impacting expected investor returns and therefore discount rates and multiples. Exposure to the risks of climate change is minimised, through rigorous assessment of potential investments and active monitoring of the carbon intensity of the current portfolio. Additionally, investment properties are being reviewed by independent third parties, where applicable, with regards to potential retrofitting, to help reduce carbon emissions and make them more efficient and sustainable for the future. 1 Basis of preparation continued Asset impairment and residual economic life The carrying value of certain tangible and intangible assets on the Consolidated Balance Sheet which are subject to impairment testing could be affected by climate change risk. For example, inventory may become obsolete or restricted, causing selling prices to decline or their costs of completion to increase. If, as a result, the cost of inventories is not recoverable, they would need to be written down to their net realisable value. Property, plant and equipment, right-of-use assets, goodwill and other intangible assets may see their recoverable amount decrease in light of climate change, and significant changes in the environment (including for example changes in regulation) in which the group operates, where adverse effects can represent an indication of impairment. The estimation of recoverable amount as \u2018value in use\u2019 requires an assessment of future expected cash flows based on assumptions potentially affected by climate related matters, particularly for intangible assets, which are subject to a higher degree of judgement. Where assets are subject to amortisation or depreciation, consideration needs to be given to whether climate risk suggests that the residual economic life is shorter than anticipated, which would give rise to increased charges in the income statement. Due to the nature of the group\u2019s tangible and intangible assets, we do not anticipate any material additional impairments or increased amortisation and depreciation charges to arise from climate change. Risks will continue to be monitored against judgements and estimates used in the assessment of impairment. Provisions and contingent liabilities The recognition, measurement and disclosure of provisions and contingent liabilities is subject to setting assumptions around future events and the probability of their occurrence. Climate-related matters could affect these elements, for example by requiring recognition or disclosure of a legal obligation (e.g. levies imposed for failing climate-related targets) or of a constructive obligation (e.g. requirements to remediate environmental damage caused by the group\u2019s operations and investment portfolios). Deferred tax assets Deferred tax assets are recognised for deductible temporary differences and unused tax losses and credits, to the extent it is probable that future taxable profit will be available, against which those amounts can be utilised. Climate-related matters could affect the group\u2019s estimate of future taxable profits, and therefore it may be required to derecognise deferred tax assets previously on the balance sheet. Share-based payments The group\u2019s performance share plans provide a direct and transparent link between executive pay and the delivery of shareholder returns over the longer-term. They are a conditional award of shares subject to a performance period of at least three years. Performance metrics for the group\u2019s share plans are now clearly linked to ESG metrics. As such, the effects of climate change could have an impact on amount and timing, recognition and measurement of amounts in the group\u2019s income statement. Retirement benefit obligations Depending on their features, the valuation of plan assets included in the group\u2019s defined benefit pension schemes may be impacted by climate-related risk, as described above, and therefore the carrying value of the net deficit on the group\u2019s balance sheet could be affected. Financial instruments Under IFRS 9, \u2018Financial Instruments\u2019, effective from 1 January 2023, expected credit losses are required to be recognised on receivables and certain financial investments, representing the counterparty\u2019s probability of default over a certain time horizon. Climate-related matters may affect the group\u2019s exposure to these losses, for example by negatively affecting the borrower\u2019s ability to meet their obligations, or by affecting assumptions used in the models adopted to estimate expected credit losses. (vii) Consolidation principles Subsidiary undertakings The consolidated financial statements incorporate the assets, liabilities, equity, income, expenses and cash flows of the company and of its subsidiary undertakings drawn up to 31 December each year. All intra-group balances, transactions, income and expenses are eliminated in full. Subsidiaries are those entities (including special purpose entities, mutual funds and unit trusts) over which the group directly or indirectly has control (i.e. when the group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee) (Note 42). Profits or losses of subsidiary undertakings sold or acquired during the year are included in the consolidated results up to the date of disposal or from the date of gaining control. Puttable instruments held by external parties in consolidated investment vehicles, such as unit trusts, are classified as liabilities and appear as \u2018Net asset value attributable to unit holders\u2019 in the Consolidated Balance Sheet. Associates and joint ventures The group has interests in associates and joint ventures (Note 43) which form part of an investment portfolio held through private equity vehicles, mutual funds, unit trusts and similar entities. In accordance with the choice permitted by IAS 28, \u2018Investments in associates\u2019, these interests have been classified as fair value through profit or loss and measured at fair value within financial investments, with changes in fair value recognised in the Consolidated Income statement. Associates and joint ventures which do not form part of an investment portfolio are initially recognised in the Consolidated Balance Sheet at cost. The carrying amount of these investments is increased or decreased to reflect the group\u2019s share of total comprehensive income after the date of the acquisition . (viii) Product classification The group\u2019s products are classified for accounting purposes as either insurance or investment contracts. The basis of accounting for these products is outlined in Notes 20 and 21 respectively. The following table summarises the classification of the group\u2019s significant types of non-participating insurance and investment contracts as well as investment products as described in Note 6 for each applicable reportable segment. Reportable segment Non-participating insurance contracts Non-participating investment contracts and investment products LGRI \u2022 Pension risk transfers \u2022 Longevity insurance \u2022 Assured payment policies Retail \u2022 UK Retail protection \u2022 UK Group protection \u2022 US protection \u2022 US Universal life \u2022 Individual annuities \u2022 Lifetime Care Plan \u2022 Lifetime mortgages \u2022 Fixed term individual annuities \u2022 Retirement interest only mortgages \u2022 Workplace savings LGIM \u2022 Institutional Pension \u2022 Segregated investment management mandates \u2022 Collective Investment Schemes (ix) Fiduciary activities Assets associated with fiduciary activities and the income arising from those assets, together with associated commitments to return such assets to customers, are not included in these financial statements. Where the group acts in a fiduciary capacity, for instance as a trustee or agent, it has no contractual rights over the assets concerned. (x) Foreign exchange and exchange rates Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. The functional currency of the group\u2019s foreign operations is the currency of the primary economic environment in which the entity operates. The assets and liabilities of all of the group\u2019s foreign operations are translated into sterling, the group\u2019s presentation currency, at the closing rate at the date of the Consolidated Balance Sheet. Income and expenses are translated at average exchange rates. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to a separate component of shareholders\u2019 equity. Foreign exchange gains and losses are recognised in the Consolidated Income Statement, except when recognised in equity as qualifying cash flow or net investment hedges. The closing exchange rates at 31 December 2022 were 1.21 United States dollar and 1.13 euro (31 December 2021: 1.35 United States dollar and 1.19 euro). The average exchange rates for the year ended 31 December 2022 were 1.24 United States dollar and 1.17 euro (31 December 2021: 1.38 United States dollar and 1.16 euro). ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-537": { "value": "1 Basis of preparation Legal & General Group Plc, a public limited company incorporated and domiciled in England and Wales, operates across four broad business areas of retirement, investment management, capital investment and insurance through its subsidiaries and associates in the United Kingdom (UK), the United States and other countries throughout the world. (i) Significant accounting policies The group financial statements have been prepared in accordance with UK-adopted international accounting standards, comprising International Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and related interpretations issued by the IFRS Interpretations Committee. Endorsement is granted by the UK Endorsement Board (UKEB). The group financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment property, available-for-sale financial assets, and certain financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The group has selected accounting policies which state fairly its financial position, financial performance and cash flows for a reporting period. The accounting policies have been consistently applied to all years presented unless otherwise stated. Accounting policies that relate specifically to a balance or transaction are presented above the relevant numerical disclosure. Financial assets and financial liabilities are disclosed gross in the Consolidated Balance Sheet unless a legally enforceable right of offset exists and there is an intention to settle recognised amounts on a net basis. Income and expenses are not offset in the Consolidated Income Statement unless required or permitted by any accounting standard or International Financial Reporting Interpretations Committee (IFRIC) interpretation, as detailed in the applicable accounting policies of the group. (ii) Going concern The group\u2019s business activities, together with the factors likely to affect its future development, performance and position in the current economic environment are set out in this Annual Report and Accounts. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in these consolidated financial statements. Principal risks and uncertainties are detailed on pages 56 to 59. The directors have made an assessment of the group\u2019s going concern, considering both the current performance and the outlook for a period of at least, but not limited to, 12 months from the date of approval of these consolidated financial statements, using the information available up to the date of issue of this Annual Report and Accounts. The group manages and monitors its capital and liquidity, and applies various stresses, including high inflationary scenarios, to those positions to understand potential impacts from market downturns. Our key sensitivities and the impacts on our capital position from a range of stresses are disclosed in section 5.01 of the Full year results in the 2022 Preliminary Management Report 1 . These stresses do not give rise to any material uncertainties over the ability of the group to continue as a going concern. Based upon the available information, the directors consider that the group has the plans and resources to manage its business risks successfully and that it remains financially strong and well diversified. Having reassessed the principal risks and uncertainties (both financial and operational) in light of the current economic environment, as detailed on pages 56 to 59, the directors are confident that the group and company will have sufficient funds to continue to meet its liabilities as they fall due for a period of, but not limited to, 12 months from the date of approval of the financial statements and therefore have considered it appropriate to adopt the going concern basis of accounting when preparing the financial statements. (iii) New standards, interpretations and amendments to published standards that have been adopted by the group The group has applied the following standards and amendments for the first time in its annual reporting period commencing 1 January 2022, which did not give rise to a material impact on the group\u2019s consolidated financial statements. Annual Improvements to IFRS Standards 2018-2020 These amendments, issued in May 2020, make minor amendments to IFRS 1 \u2018First-time Adoption of IFRS\u2019, IFRS 9 \u2018Financial instruments\u2019, IAS 41 \u2018Agriculture\u2019 and the illustrative examples accompanying IFRS 16 \u2018Leases\u2019. Amendments to IAS 16 \u2013 Property, plant and equipment These amendments, issued in May 2020, prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss. Amendments to IAS 37 \u2013 Provisions, contingent liabilities and contingent assets These amendments, issued in May 2020, specify which costs a company includes when assessing whether a contract will be loss-making. Amendments to IFRS 3 \u2013 Business Combinations These amendments, issued in May 2020, update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. 1. Section 5.01 of the Full year results in the 2022 Preliminary Management Report is unaudited.
(iv) Standards, interpretations and amendments to published standards which are not yet effective
IFRS 17 \u2013 Insurance Contracts and IFRS 9 \u2013 Financial Instruments
The group will apply IFRS 17, \u2018Insurance Contracts\u2019 and IFRS 9, \u2018Financial Instruments\u2019 for the first time on 1 January 2023. These standards will bring
significant changes to the accounting for insurance and reinsurance contracts and financial instruments and are expected to have a material impact on
the group\u2019s financial statements in the period of initial application.
(a) Introduction
IFRS 17, \u2018Insurance Contracts\u2019
IFRS 17, \u2018Insurance Contracts\u2019 was originally issued in May 2017 by the IASB, and subsequent amendments were issued in June 2020. The standard is
effective for annual periods beginning on or after 1 January 2023 following endorsement for use in the UK in May 2022. The standard, which replaces
IFRS 4, \u2018Insurance Contracts\u2019, will be applied retrospectively, subject to the transitional options provided for in the standard and provides a comprehensive
approach for accounting for insurance contracts including their measurement, income statement presentation and disclosure.
The key general principles of IFRS 17 are that an entity:
\u2022 Identifies insurance contracts as those under which the entity accepts significant insurance risk from another party (the policyholder) by agreeing to
compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder;
\u2022 Separates specified embedded derivatives, distinct investment components and distinct non-insurance goods or services from insurance contracts
and accounts for them in accordance with other accounting standards;
\u2022 Aggregates the insurance contracts into groups it will recognise and measure (by portfolio, year of inception and profitability);
\u2022 Recognises and measures groups of insurance contracts at:
\u2013 a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all available information about the fulfilment
cash flows; and
\u2013 an amount representing the unearned profit in the group of contracts (the contractual service margin or CSM);
\u2022 Recognises profit from a group of insurance contracts over the period the group provides insurance coverage. If a group of contracts is expected to
be onerous (i.e. loss making) over the remaining coverage period, a loss is recognised immediately; and
\u2022 Presents insurance service results (including insurance revenue) separately from insurance finance income or expenses with an accounting policy
choice to disaggregate insurance income and expense for the period between profit or loss and other comprehensive income.
IFRS 9, \u2018Financial Instruments\u2019
In July 2014, the IASB issued IFRS 9, \u2018Financial Instruments\u2019 which was effective for annual periods beginning on or after 1 January 2018. The standard
replaced IAS 39, \u2018Financial Instruments: Recognition and Measurement\u2019. It includes new principles around classification and measurement of financial
instruments, introduces an impairment model based on expected credit losses (replacing the current model based on incurred losses) and new
requirements on hedge accounting. The IASB subsequently issued \u2018Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance
Contracts\u2019 which allowed entities which meet certain requirements to defer their implementation of IFRS 9 until adoption of IFRS 17, \u2018Insurance
Contracts\u2019 or 1 January 2021, whichever is the earlier. In June 2020, the IASB agreed to extend the temporary exemption in IFRS 4 from applying IFRS 9
to annual reporting periods beginning on or after 1 January 2023. The group has qualified for, and has made use of this deferral option, and will therefore
apply IFRS 9 for the first time on 1 January 2023, with a restatement of 2022 comparatives.
IFRS 9 classifies financial assets into the following three categories: amortised cost, fair value through other comprehensive income and fair value
through profit or loss. The classification of financial assets is based on the entity\u2019s business model for managing them, as well as their contractual cash
flow characteristics. With the exception of financial assets measured under fair value through profit or loss (FVTPL), an expected credit loss impairment
model applies to all financial assets in scope (including lease receivables and contract assets). The new impairment model requires utilising not only
past events and current conditions but also reasonable and supportable forward-looking information, in order to assess the credit risk profiles of those
financial assets in scope.
Most requirements around financial liabilities in IAS 39 have been retained by IFRS 9, and hedge accounting requirements have been revised by replacing
some of the prescriptive rules in IAS 39 with more principle-based requirements, to better align with the entity\u2019s risk management activities.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 151
Strategic report Governance Financial statements Other information
Primary statements and performance
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1 Basis of preparation continued
(b) Estimated impacts of the adoption of IFRS 17 and IFRS 9
The group has assessed the estimated impact that the initial application of IFRS 17 and IFRS 9 will have on its consolidated financial statements at the
transition date of 1 January 2022. The total adjustment to the group\u2019s equity attributable to owners of the parent is estimated to be a reduction of \u00a35.5bn.
The estimated impacts on the key line items in the group\u2019s consolidated balance sheet are set out below:
31 December
2021
(as reported)
Adjustments
due to
adoption of
IFRS 9
Adjustments
due to
adoption of
IFRS17
1 January
2022
(restated)
Balance Sheet item \u00a3bn \u00a3bn \u00a3bn \u00a3bn
Financial investments 538.4 (0.6) \u2013 537.8
Net insurance contract liabilities
1
(82.9) \u2013 (6.2) (89.1)
Net deferred tax (liabilities)/assets (0.2) 0.1 1.3 1.2
Other (444.8) \u2013 (0.1) (444.9)
Equity attributable to owners of the parent 10.5 (0.5) (5.0) 5.0
1. Net insurance contract liabilities reflect insurance contract assets and liabilities, net of reinsurance contracts.
While the adoption of these accounting standards will have an impact on the timing and profile of profit recognition, as communicated at the group\u2019s
IFRS 17 investor and analyst event on 29 November 2022, the underlying economics and cash generation of the group\u2019s businesses do not change.
The financial impacts noted above will be reflected, where appropriate, in the interim financial statements for the period ending 30 June 2023, and in
the group\u2019s Annual Report and Accounts for the year ending 31 December 2023. The financial impacts relating to the periods ending 30 June 2022 and
31 December 2022 have not yet been finalised and are not reasonably estimable for the purpose of inclusion in these consolidated financial statements.
(i) Adjustments due to the adoption of IFRS 17
The different timing of profit recognition will result in an increase in liabilities, and therefore decrease in equity attributable to owners of the parent
on adoption of IFRS 17. This reflects that a portion of profits previously recognised and accumulated in equity under IFRS 4 will be included in the
measurement of the liabilities under IFRS 17. This increase in liabilities can be attributed to the following:
Changes from IFRS 4
Estimated impact on net
insurance contract liabilities
on transition to IFRS 17
\u00a3bn
Remeasurement of liabilities: the IFRS 17 cash flows are best estimate and exclude all prudent margins included in the IFRS 4 liabilities.
Removal of these margins coupled with other changes to the insurance contract measurement, including discount rates and the exclusion of
non-attributable expenses, results in a lower best estimate liability.
(7.5)
Creation of a risk adjustment \u2013 IFRS 17 incorporates a specific risk adjustment for non-financial risk (which is lower than the prudent margins
included within the IFRS 4 liabilities).
2.5
Creation of CSM: determined using the transition approaches described below and reflecting the unearned profit of these contracts. Under
IFRS 4 profit could be recognised at inception.
11.2
Total 6.2
(ii) Adjustments due to the adoption of IFRS 9
Upon transition to IFRS 9 on 1 January 2022, the group\u2019s equity attributable to owners of the parent will decrease by c.\u00a30.6bn (before tax). This
predominantly reflects the remeasurement of assets following the reclassification of a proportion of financial investments from fair value through
profit or loss to amortised cost, in order to better align the accounting treatment of assets that are backing the CSM component of insurance contract
liabilities, which is measured at locked-in discount rates under IFRS 17. The application of the expected credit loss impairment requirements does not
have a material impact on the group\u2019s equity at the point of transition.
(c) Significant accounting policies \u2013 IFRS 17, \u2018Insurance Contracts\u2019
Long term insurance contracts \u2013 initial measurement
Insurance contracts are contracts which transfer significant insurance risk to the insurer at the inception of the contract. This is the case if, and only
if, an insured event could cause an insurer to make significant additional payments in any scenario, other than a scenario which lacks commercial
substance. Such contracts remain insurance contracts until all rights and obligations are extinguished or expire. Contracts can be reclassified as
insurance contracts after inception if insurance risk becomes significant. Any contracts not considered to be insurance contracts under IFRS 17
are classified as investment contracts and are measured under IFRS 9. The scope of IFRS 17 is very closely aligned to IFRS 4.
All of the group\u2019s in scope insurance contracts are accounted for under the general measurement model which measures a group of insurance
contracts as the total of:
\u2022 fulfilment cash flows; and
\u2022 a CSM representing the unearned profit the group will recognise as it provides services under the insurance contract.
Legal & General Group Plc\u2002Annual Report and Accounts 2022152 Financial statements
Primary statements and performance
continued
13.2_Financial_statements_v3.indd 15213.2_Financial_statements_v3.indd 152 14/03/2023 20:2114/03/2023 20:21
Fulfilment cash flows
Fulfilment cash flows comprise unbiased and probability-weighted estimates of future cash flows, discounted to present value to reflect the time
value of money and financial risks, plus a risk adjustment for non-financial risk. The group\u2019s objective in estimating future cash flows is to determine
the expected value, or the probability weighted mean, of the full range of possible outcomes, considering all reasonable and supportable information
available at the reporting date without undue cost or effort. The group estimates future cash flows considering a range of scenarios which have
commercial substance and give a good representation of possible outcomes. The cash flows from each scenario are probability-weighted and
discounted using current assumptions.
When estimating future cash flows, the group includes all cash flows that are within the contract boundary. The contract boundary for the group\u2019s
contracts is very closely aligned with that applied under IFRS 4. The cash flows include:
\u2022 premiums and related cash flows;
\u2022 claims and benefits, including reported claims not yet paid, incurred claims not yet reported and expected future claims;
\u2022 investment management costs incurred in the provision of an investment return service or to enhance the benefits of an insurance contract;
\u2022 payments to policyholders resulting from embedded surrender value options;
\u2022 an allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs;
\u2022 claims handling costs;
\u2022 policy administration and maintenance costs, including recurring commissions that are expected to be paid to intermediaries;
\u2022 an allocation of fixed and variable overheads directly attributable to fulfilling insurance contracts; and
\u2022 transaction-based taxes.
The group incorporates, in an unbiased way, all reasonable and supportable information available without undue cost or effort about the amount,
timing and uncertainty of those future cash flows. The group estimates the probabilities and amounts of future payments under existing contracts
based on information obtained, including:
\u2022 information about claims already reported by policyholders;
\u2022 other information about the known or estimated characteristics of the insurance contracts;
\u2022 historical data about the group\u2019s own experience, supplemented when necessary, with data from other sources. Historical data is adjusted to reflect
current conditions; and
\u2022 current pricing information, when available.
The measurement of fulfilment cash flows-includes insurance acquisition cash flows which are allocated as a portion of premium to profit or loss
(through insurance revenue) over the period of the contract.
Risk adjustment
The risk adjustment for non-financial risk for a group of insurance contracts reflects the compensation that the group would require for bearing
uncertainty about the amount and timing of the cash flows that arises from non-financial risk after diversification. We have calibrated the group\u2019s
risk adjustment using a Value at Risk (VAR) methodology. The total group risk adjustment at transition was \u00a32.5bn.
Discounting
The insurance contract fulfilment cash flows are discounted at rates that reflect the characteristics of the insurance contract liabilities. These have
been determined using the top-down approach, starting from an appropriate asset portfolio with deductions to remove risks in the assets that are
not present in the insurance liabilities. As is the case under IFRS 4, the discount rate is a key determinant of the measurement of the insurance liability,
particularly for annuity business. At transition, the average credit default deduction was c.41bps compared with c.43bps under IFRS 4.
Contractual service margin
The group\u2019s CSM is a component of the asset or liability for the group of insurance contracts that represents the unearned profit the group will recognise
as it provides services in the future. The group measures the CSM on initial recognition at an amount that, unless the group of contracts is onerous,
results in no income or expenses arising from:
\u2022 initial recognition of the fulfilment cash flows;
\u2022 any cash flows arising from the contracts in the group at that date;
\u2022 the derecognition at the date of initial recognition of:
\u2013 any asset for insurance acquisition cash flows; and
\u2013 any other asset or liability previously recognised related to the group of insurance contracts.
Aggregation
The level of aggregation determines the unit of account at which IFRS 17 calculations are performed. This is determined firstly by dividing the business
written into portfolios. Portfolios comprise groups of contracts with similar risks which are managed together. Portfolios are further divided based
on expected profitability at inception into three categories: onerous contracts, contracts with no significant risk of subsequently becoming onerous,
and the remainder. IFRS 17 also requires that no group for level of aggregation purposes may contain contracts issued more than one year apart.
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Onerous contracts
For groups of contracts assessed as onerous, the group recognises a loss in profit or loss for the net outflow, resulting in the carrying amount of the
liability for the group being equal to the fulfilment cash flows and the CSM of the group being zero. A loss component is established by the group for
the liability for remaining coverage for an onerous group, which represents the losses recognised.
Long term insurance contracts \u2013 subsequent measurement
The group measures the carrying amount of a group of insurance contracts at the end of each reporting period as the sum of: (i) the liability for
remaining coverage comprising fulfilment cash flows related to future service allocated to the group at that date and the CSM of the group at that
date; and (ii) the liability for incurred claims for the group reflecting the fulfilment cash flows related to past service allocated to the group at that date.
Contractual service margin \u2013 measurement
The CSM at the end of the reporting period represents the profit in the group of insurance contracts that has not yet been recognised in profit or loss,
because it relates to future service to be provided.
For a group of insurance contracts the carrying amount of the CSM of that group at the end of the reporting period equals the carrying amount at the
beginning of the reporting period adjusted, as follows:
\u2022 the effect of any new contracts added;
\u2022 interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates at initial recognition;
\u2022 the changes in fulfilment cash flows relating to future service, except to the extent that:
\u2013 such increases in the fulfilment cash flows exceed the current carrying amount of the CSM, giving rise to a loss; or
\u2013 such decreases in the fulfilment cash flows are allocated to the loss component of the liability for remaining coverage;
\u2022 the amount recognised as insurance revenue because of the transfer of services in the period, determined by allocation of the contractual service
margin at the end of the period over the current and remaining coverage period; and
\u2022 the effect of any currency exchange differences on the CSM.
The changes in fulfilment cash flows relating to future service that adjust the CSM comprise of:
\u2013 experience adjustments that arise from the difference between the premium receipts (net of refunds) and any related cash flows such as
insurance acquisition cash flows and insurance premium taxes and the estimate, at the beginning of the period, of the amounts expected.
Differences related to premiums received (or due) in respect of current or past services are recognised immediately in profit or loss while
differences related to premiums received (or due) for future services are adjusted against the CSM;
\u2013 changes in estimates of the present value of future cash flows in the liability for remaining coverage, except those relating to the time value
of money and changes in financial risk (which are recognised in the statement of profit or loss and other comprehensive income rather than
adjusting the CSM);
\u2013 differences between any investment component expected to become payable in the period and the actual investment component that becomes
payable in the period; and
\u2013 changes in the risk adjustment for non-financial risk that relate to future service.
Adjustments to the CSM noted above are measured at discount rates that reflect the characteristics of the cash flows of the group of insurance
contracts at initial recognition (i.e. the weighted average of the rates applicable at the date of initial recognition of contracts that joined a group over
a 12-month period).
Onerous contracts
Groups of contracts that were not onerous at initial recognition can also subsequently become onerous if assumptions and experience changes.
The group establishes a loss component for any onerous group depicting the future losses recognised. The loss component is released based on
a systematic allocation of the subsequent changes in the fulfilment cash flows to: (i) the loss component; and (ii) the liability for remaining coverage
excluding the loss component. The loss component is also updated for subsequent changes in estimates of the fulfilment cash flows related to future
service. The systematic allocation of subsequent changes to the loss component results in the total amounts allocated to the loss component being
equal to zero by the end of the coverage period of a group of contracts (since the loss component will have materialised in the form of incurred claims).
The loss component ensures that over the duration of the contract, the correct amounts are recognised as insurance revenue and insurance
service expenses.
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Contractual service margin \u2013 recognition
The amount of contractual service margin recognised in the income statement for a group of insurance contracts reflects the insurance contract
services provided. The proportion of the CSM earned is calculated as the amount of coverage units provided in the period divided by the sum of all the
future and current period coverage units. The group has elected to discount the future coverage units in this calculation. The table below indicates the
main insurance contracts services provided under the group\u2019s insurance contracts and selected coverage unit(s) used to measure those services.
Insurance contract Insurance service Coverage unit(s)
Immediate annuity Payment of insurance claims Expected annual claims payments
Deferred annuity \u2022 Payment of insurance claims (payment phase)
\u2022 Investment return service (deferral phase)
\u2022 Lump sum death benefits (deferral phase)
\u2022 Expected annual claims payments
\u2022 Expected investment return on backing assets
\u2022 Sum assured
Longevity swaps Payment of floating leg of swap Expected annual floating leg payments
Retail Protection Potential mortality or morbidity claims Sum assured
Group Protection Potential mortality or morbidity claims Sum assured
Where a specific unit of account contains a mixture of services, and therefore coverage units, it is necessary to weight the coverage units so that
the resulting profile of CSM release reflects the overall package of benefits provided. This is particularly pertinent to units of account incorporating a
combination of immediate and deferred annuities. Under IFRS 17, deferred annuities usually provide multiple services, split between the two phases
of benefit provision (the deferral phase and the payment phase). Significant judgement is therefore required to combine the different coverage units so
that they fairly reflect the services provided. The weighting between the deferral phase and the payment phase coverage units is calculated so that the
services provided in the deferral phase reflect the investment return provided and the probability weighted delivery of any lump sum death benefits, both
adjusted to target that all of the CSM is earned in the deferral phase for all contracts which do not enter the payment phase either through transfer out,
withdrawal of funds or death.
Earning the CSM over the coverage period will slow down profit recognition for annuities in comparison to IFRS 4 which allowed the recognition of profit
on inception and more closely linked revenue recognition to risk release rather than the provision of service.
Investment components
Investment components will not be included in insurance revenue and insurance service expenses under IFRS 17. As a result, revenue from some
annuity and universal life contracts will be reduced in comparison with the premium recognised under IFRS 4. The group will identify the investment
component of a contract by determining the amount that it would be required to repay to the policyholder in all scenarios with commercial substance.
Insurance finance income and expense
IFRS 17 requires an accounting policy decision as to whether to recognise all finance income or expense in profit or loss, or whether to disaggregate the
income or expense that relates to changes in financial assumptions into other comprehensive income. All finance income and expense will be included
in profit or loss except for protection business where this will be disaggregated.
Reinsurance contracts held
The measurement of reinsurance contracts held follows the same principles as those for insurance contracts issued, with the exception of the following:
\u2022 measurement of the cash flows includes an allowance on a probability-weighted basis for the effect of any non-performance by the reinsurers,
including the effects of collateral and losses from disputes;
\u2022 the group determines the risk adjustment for non-financial risk so that it represents the amount of risk being transferred to the reinsurer;
\u2022 both day 1 gains and day 1 losses are not recognised at initial recognition in the statement of financial position but are deferred into CSM and
released to profit or loss as the reinsurer renders services, except for any portion of a day 1 loss that relates to events before initial recognition;
\u2022 if the reinsurance contract is recognised prior to a loss-making underlying contract, the reinsurance CSM can be adjusted to offset a portion of the
inception loss (the loss recovery component); and
\u2022 subsequent changes in the fulfilment cash flows are recognised in profit or loss if the related changes arising from the underlying ceded contracts
are recognised in profit or loss. Alternatively, changes in the fulfilment cash flows adjust the CSM.
Transition
On transition to IFRS 17, the group has applied the fully retrospective approach unless impracticable. The full retrospective approach requires the group to:
\u2022 identify, recognise and measure each group of insurance and reinsurance contracts as if IFRS 17 had always applied;
\u2022 derecognise any existing balances that would not exist had IFRS 17 always applied; and
\u2022 recognise any resulting net difference in equity.
If it was impracticable to apply a full retrospective approach to a group of contracts then the group has chosen between the modified retrospective
approach and the fair value approach. If the group could not obtain reasonable and supportable information necessary to apply the modified
retrospective approach, then the fair value approach has been chosen.
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The group has applied the following transition approaches to its material insurance contract portfolios on transition to IFRS 17, by year of issue:
Transition Approach Annuities UK Protection US Protection
Full retrospective 2021 2021 2021
Modified retrospective 2016-2020 2012-2020 2011-2020
Fair value Pre-2016 Pre-2012 Pre-2011
Full retrospective approach
The full retrospective approach has been determined to be impracticable where the effects of retrospective application are not determinable because
information required has not been collected (or not with sufficient granularity), application would require the application of hindsight, or information is
unavailable because of system migrations, data retention requirements or other reasons. Specific examples include:
\u2022 historic calibration of IFRS 17 specific judgements, such as the scale of the risk adjustment;
\u2022 expectations about a contract\u2019s profitability and risks of becoming onerous required for identifying groups of contracts;
\u2022 information about historical cash flows and discount rates required for determining the estimates of cash flows on initial recognition and their
subsequent changes on a retrospective basis;
\u2022 information required to allocate fixed and variable overheads to groups of contracts, because the group\u2019s current accounting policies do not require
such information; and
\u2022 information about certain changes in assumptions and estimates because they were not documented on an ongoing basis.
Modified retrospective approach
The objective of the modified retrospective approach is to achieve the closest outcome to retrospective application possible using reasonable and
supportable information available without undue cost or effort.
The only modification applied by the group is that for some groups of contracts issued before 2020, the risk adjustment for non-financial risk on initial
recognition will be determined by adjusting the amount at 1 January 2022 for the expected release of risk before that date. The expected release will
be determined with reference to the release of risk of similar contracts that the group issued in 2022. This modification has been used to avoid the
application of hindsight to the calibration of the risk adjustment in prior periods.
Fair value approach
The group has applied the fair value approach on transition for certain groups of contracts as, prior to transition, it grouped contracts from multiple
cohorts and years into a single unit for accounting purposes. Obtaining reasonable and supportable information to apply the full retrospective approach
was impracticable without undue cost or effort. The group has determined the CSM of the liability for remaining coverage at the transition date, as the
difference between the fair value of the group of insurance contracts and the fulfilment cash flows measured at that date. In determining fair value, the
group has applied the requirements of IFRS 13, \u2018Fair Value Measurement\u2019, except for the demand deposit floor requirement. The fair value attributed to
the in-scope annuity business is calculated with reference to a price generated using the group\u2019s pricing models and pricing assumptions at the
transition date. This incorporates an expected internal rate of return that has been validated against relevant market transactions.
The group has aggregated contracts issued more than one year apart in determining groups of insurance contracts under the fair value approach
at transition. The group did not have reasonable and supportable information to aggregate groups into those including only contracts issued within
one year.
For portfolios of protection contracts, the group has elected to disaggregate insurance finance income or expenses between amounts included in profit
or loss and amounts included in other comprehensive income. For these portfolios, the cumulative amount of insurance finance income or expense
recognised in other comprehensive income at the transition date and has been reset to zero in line with the provisions of the standard.
(d) Significant accounting policies \u2013 IFRS 9, \u2018Financial Instruments\u2019
Financial assets \u2013 classification and measurement
The classification and measurement of financial assets depends on their contractual cash flow characteristics and how they are managed
(the entity\u2019s business model). The contractual cash flow characteristics test aims to identify those assets with cash flows consistent with a basic
lending arrangement, i.e. which are \u2018solely payments of principal and interest\u2019 (SPPI). The business model test refers to how an entity manages its
financial assets with the objectives of generating cash flows. These factors determine whether the financial assets are measured at amortised cost,
fair value through other comprehensive income or fair value through profit or loss. Assets are therefore typically characterised as follows:
\u2022 amortised cost: financial assets with contractual terms that give rise solely to interest and principal cash flows and which are held in a business
model whose objective is to hold the assets to collect their cash flows;
\u2022 fair value through other comprehensive income (FVOCI): financial assets with contractual terms that give rise solely to interest and principal cash
flows and which are held in a business model whose objective is achieved by holding the assets to collect their cash flows and selling them;
\u2022 FVTPL: all other financial assets.
Notwithstanding the above, on initial recognition the group may irrevocably designate to FVTPL a financial asset that would otherwise be measured
at amortised cost or FVOCI if doing so eliminates or greatly reduces an accounting mismatch. Additionally, on initial recognition of an equity investment
not held for trading the group may irrevocably elect to present its subsequent changes in fair value through other comprehensive income.
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Based on the new requirements, IFRS 9 will affect the classification and measurement of financial assets as follows:
\u2022 financial assets continuing to be measured at FVTPL:
\u2013 equity investments, measured at FVTPL under IAS 39, will continue to be measured at FVTPL under IFRS 9;
\u2013 derivative assets are held for trading instruments under both IAS 39 and IFRS 9, and will therefore continue to be measured at FVTPL, unless
designated as hedging items as part of a hedge accounting relationship;
\u2013 debt instruments backing annuity liabilities, including surplus assets, are currently accounted for at FVTPL as they are managed on a fair value
basis. Most of these will retain the same measurement under IFRS 9 as their business model does not naturally fit a \u2018held to collect\u2019 or \u2018held to
collect and sell\u2019 business model, irrespective of their contractual cash flows characteristics; and
\u2013 other debt securities backing investment contract liabilities and surplus shareholder assets will continue to be accounted for at FVTPL as they
are managed on a fair value basis, consistent with their IAS 39 measurement.
\u2022 financial assets remeasured to amortised cost or FVOCI:
\u2013 as the date of transition to IFRS 9 for the group is the same as that for IFRS 17, the group has reassessed the classification and measurement
of certain financial assets backing annuities liabilities, in order to better match interest rate and inflation sensitivities to IFRS 17 liabilities. This is
because, while the Annuities best estimate liability and risk adjustment under IFRS 17 are measured with current financial assumptions, the CSM
is measured with locked-in discount rates. Therefore, a sub-portfolio of long dated debt instruments backing annuity contracts but in surplus to
the IFRS 17 best estimate liability and risk adjustment, and passing the SPPI test, was separately identified. These assets will be used to manage
interest and inflation rate exposure. They will be held to maturity in a \u2018held to collect\u2019 business model and accounted for at amortised cost; and
\u2013 assets backing protection liabilities are measured at FVTPL under IAS 39. Based on the IFRS 9 criteria, these assets pass the SPPI test and
will be measured at amortised cost or FVOCI, depending on their business model.
\u2022 receivable balances are accounted for at amortised cost under both IAS 39 and IFRS 9.
Financial assets \u2013 impairment
IFRS 9 replaces the incurred losses impairment model in IAS 39 with a new impairment model, based on expected credit losses (ECLs). The new
impairment model applies to the group\u2019s financial assets measured at amortised cost or FVOCI, as well as lease receivables in scope of IFRS 16 \u2018Leases\u2019
and contract assets in scope of IFRS 15 \u2018Revenue from Contracts with Customers\u2019.
Under IFRS 9, expected credit losses are defined as the present value of the difference between all contractual cash flows that are due and all cash flows
that the entity expects to receive (i.e. the cash shortfall), weighted based on their probability of occurrence. The loss allowance recognised under the new
standard can be equal to an amount corresponding to a 12-month ECL or a lifetime ECL. A lifetime ECL is the ECL resulting from all possible default
events over the expected life of the financial asset; a 12-month ECL is the portion of lifetime ECL resulting from default events on a financial asset that
are possible within the 12 months after the reporting date. The ECL model is run from the date of initial recognition of a financial asset, and its output
updated at every reporting period, even if no actual loss events have taken place. The impact of updating the inputs of the ECL model in the reporting
period is recognised in profit or loss directly where it affects the carrying value of financial assets at amortised cost, while for assets at FVOCI an equal
and opposite movement is recorded in other comprehensive income.
In order to determine whether the group measures ECLs at an amount equal to 12-month ECL or lifetime ECL, at each reporting period the group is
required to assess which \u2018stage\u2019 a financial asset falls into. Stages reflect the general pattern of deterioration in credit risk of a financial instrument that
ultimately defaults, as follows:
\u2022 Stage 1 includes financially healthy financial assets that are expected to perform in line with their contractual terms, and which have no signs of
increased credit risk;
\u2022 when the credit risk of a certain financial asset has significantly increased since initial recognition, the instrument no longer falls into Stage 1.
In that case, if the instrument is not credit-impaired, the instrument will fall into Stage 2; and
\u2022 Stage 3 applies to credit-impaired financial instruments.
When financial assets are under Stage 1, 12-month ECLs are recognised. When financial assets are under Stage 2 or 3, lifetime ECLs are recognised.
An instrument moves down (or up) the stages when a significant increase in credit risk (SICR) has happened (or has reversed).
When determining whether the credit risk of a financial instrument has increased significantly since initial recognition, the group considers reasonable
and supportable information, both qualitative and quantitative, that is relevant and is available without undue cost or effort, including forward-looking
information at its disposal.
The provisions of IFRS 9 include a rebuttable presumption that the credit risk on a financial asset has increased significantly since initial recognition
when contractual payments are more than 30 days past due, which is taken into account for this assessment.
Additionally, the group makes use of a practical expedient available in IFRS 9 whereby it can be assumed that the credit risk on a financial instrument has
not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date (e.g. investment
grade as determined by the group\u2019s asset managers). This allows recognition of 12-month ECLs as opposed to, potentially, lifetime ECLs.
The group estimates ECLs on its financial investments at amortised cost and debt instruments at FVOCI by using the probability of default approach.
Based on this method, the ECLs are a probability-weighted estimate of the present value of estimated cash shortfalls, i.e. the weighted average of credit
losses, with the respective risks of a default occurring used as the weightings. For this purpose, the key elements to be calculated are the Probability
of Default (PD), i.e. the estimate of the likelihood of default over a given time horizon (either 12 months or lifetime); the respective Loss Given Default
(LGD); and the Exposure at Default (EAD).
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In order to determine 12-month or lifetime PDs the group\u2019s models utilise historical data obtained from S&P and Moody\u2019s in order to evaluate transitions
(i.e. the probability that a security changes rating in a given year) and defaults, plus scenario-specific annual scaling factors which adjust the PDs for
forward-looking information. The final PDs produced by the model are unconditional, i.e. they incorporate both the probability of not defaulting until the
start of the period, and the subsequent probability of default in that period, conditional on the position not having defaulted to that point. This allows them
to be summed over 12 months to provide 12-month PD estimates, or over all remaining months to produce lifetime PD estimates.
LGD is the magnitude of the likely loss if there is a default, based on the history of recovery rates of claims against defaulted counterparties, and taking
into account collateral values where applicable.
EAD represents the expected exposure in the event of a default, based on the current exposure to the counterparty and potential changes to the current
amount allowed under the contract.
Finally, the group has adopted a simplified approach for trade receivables, contract assets and finance and operating lease receivables. This allows
measurement of lifetime ECLs only, thereby removing the need to identify SICRs. For these balances, the group makes use of provision matrices in order
to calculate such lifetime ECLs. This is a practical expedient allowed by IFRS 9 whereby historical credit loss experience and fixed loss rates are applied
to the balances outstanding. Where possible, historical loss rates are adjusted to allow for forward looking information.
Owing predominantly to the high credit rating across the group\u2019s financial assets in scope of the new impairment model, the calculation of ECLs as at
the date of initial application of IFRS 9 did not give rise to a material impact.
Financial liabilities
IFRS 9 largely retains the requirements of IAS 39 for the classification and measurement of financial liabilities, which can be at either amortised cost or
FVTPL. In contrast with IAS 39, under IFRS 9 the amount of fair value changes for financial liabilities at FVTPL attributable to changes in the credit risk
of the liability is presented in other comprehensive income. However, if this treatment creates, or enlarges, an accounting mismatch in profit or loss, the
group must present all gains or losses for that liability (including the effects of changes in the credit risk of that liability) in profit or loss.
The new requirements for financial liabilities did not affect the group\u2019s classification and measurement of its instruments.
Hedge accounting
When initially applying IFRS 9, the group may choose to either continue to apply hedge accounting requirements in IAS 39 or move to the new IFRS 9
principles. The group will update its accounting policies to adopt IFRS 9 requirements. These requirements are better aligned with the risk management
activities of the group and therefore it is expected that going forward more risk management strategies will qualify for hedge accounting. Changes to
hedge accounting requirements are not currently expected to have a significant impact on the group\u2019s results.
Transition
On transition, changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively.
For the group, IFRS 9 has a date of initial application of 1 January 2023, which coincides with the implementation with IFRS 17. On initial application,
while IFRS 17 requires the presentation of at least one restated comparative period, IFRS 9 permits, but does not require, restatement of comparative
periods. In line with IFRS 17 the group has chosen to restate comparative periods under IFRS 9. While the standard does not apply to financial assets
already derecognised by 1 January 2023, the group has applied a \u2018classification overlay\u2019 introduced by the IASB per an amendment to IFRS 17 entitled
\u2018Initial Application of IFRS 9 and IFRS 17 \u2013 Comparative Information\u2019. This allows an entity applying IFRS 17 and IFRS 9 at the same time to present
comparative information as if the classification, measurement and impairment requirements of IFRS 9 had been applied to them, irrespective of
derecognition date.
From a classification and measurement perspective, financial assets\u2019 business models have been assessed as at the date of initial application and were
applied consistently in all periods presented. If an asset was in scope of the classification overlay described above, the group aligned the classification
and measurement of each financial asset in the comparative periods with what it expected it would have been on 1 January 2023. Such assessment
was performed based on reasonable and supportable information available at 1 January 2022, the transition date. Any difference between the IAS 39
carrying amount of a financial asset and the carrying amount at the transition date that results from applying IFRS 9 or the classification overlay was
recognised in opening retained earnings.
With regards to impairment, similarly to classification and measurement, the group assessed whether as at 1 January 2023 there had been a SICR as
compared to the date that a financial instrument was initially recognised, and applied a 12-month or lifetime ECL accordingly. The group chose to apply
the impairment requirements of IFRS 9 consistently to all of the applicable financial instruments on its books during the comparative periods. To the
extent the classification overlay applied and therefore an asset was derecognised by 1 January 2023, any expected credit losses recognised in the
comparative periods were reversed upon disposal. The low credit risk practical expedient described previously was also available for the purpose of
transition, and the group made use of this in line with set criteria. On transition to IFRS 9, any additional provision recognised when compared to IAS 39
was recognised in opening retained earnings. However, if this related to a financial asset at FVOCI, an equal and opposite movement was reflected in the
OCI reserve.
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Amendments to IAS 1 \u2013 Presentation of Financial Statements and IFRS Practice Statement 2: \u2018Making Materiality Judgements: Disclosure of
Accounting Policies\u2019
These amendments, issued in February 2021, intend to help preparers in deciding which accounting policies to disclose in their financial statements,
by applying materiality judgements. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group is
currently revisiting its accounting policy disclosures to ensure compliance and consistency with the new requirements.
Amendments to IAS 8 \u2013 Accounting policies, Changes in Accounting Estimates and Errors: \u2018Definition of Accounting Estimates\u2019
These amendments, issued in February 2021, aim to help entities to distinguish between accounting policies and accounting estimates. The
amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group does not expect the impact to be significant.
Amendments to IAS 12 \u2013 Income Tax: \u2018Deferred Tax related to Assets and Liabilities arising from a Single Transaction\u2019
These amendments, issued in May 2021, clarify how companies account for deferred tax on transactions such as leases and decommissioning
obligations. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group does not expect the impact
to be significant.
Amendments to IAS 1 \u2013 Presentation of Financial Statements: \u2018Classification of Liabilities as Current or Non-Current\u2019
These amendments, issued in January 2020, clarify the existing requirements for classifying liabilities as current or non-current. The amendments
are effective for annual reporting periods beginning on or after 1 January 2024, subject to UK endorsement.
Amendments to IAS 1 \u2013 Presentation of Financial Statements: \u2018Non-current Liabilities with Covenants\u2019
These amendments, issued in October 2022, clarify that only covenants with which an entity must comply on or before the reporting date will affect
a liability\u2019s classification as current or non-current. The amendments are effective for annual reporting periods beginning on or after 1 January 2024,
subject to UK endorsement.
Amendments to IFRS 16 \u2013 Leases: \u2018Lease Liability in a Sale and Leaseback\u2019
These amendments, issued in September 2022, specify requirements for seller-lessees to measure the lease liability in a sale and leaseback transaction.
The amendments are effective for annual reporting periods beginning on or after 1 January 2024, subject to UK endorsement.
(v) Critical accounting policies and the use of estimates
The preparation of the financial statements includes the use of estimates and assumptions which affect items reported in the Consolidated Balance
Sheet and Consolidated Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these
estimates are based on management\u2019s best knowledge of current circumstances and future events and actions, material adjustments could be made to
the carrying amounts of assets and liabilities within the next financial year. The Audit Committee reviews the reasonableness of judgements associated
with and the application of significant accounting policies. The significant accounting matters considered by the Audit Committee in respect of the year
ended 31 December 2022 are included within the Audit Committee Report on page 88.
The major areas of critical accounting judgement on policy application are considered below:
Insurance and investment contract liabilities (Notes 20 and 21): Product classification and the assessment of the significance of insurance risk
transferred to the group in determining whether a contract should be accounted for as an insurance or investment contract.
Contracts which transfer significant insurance risk to the group are classified as insurance contracts. Contracts that transfer financial risk (e.g. change
in interest rate or security price) to the group but not significant insurance risk are classified as investment contracts.
Judgement is required in order to assess the significance of the transfer of insurance risk within a contract. This assessment is based on whether the
occurrence of an insured event could cause the group to make significant additional payments, i.e. if the occurrence of the event causes significantly
higher cash out flows for the group than its non-occurrence.
Certain contracts, which are both insurance and investment, can contain discretionary participating features representing the contractual right to receive
additional benefits as a supplement to guaranteed benefits under certain conditions, being:
\u2022 that the additional benefits are a significant portion of the total contractual benefits;
\u2022 the amount and timing of the additional benefits is at the discretion of the group; and
\u2022 that the additional benefits are contractually dependent upon the performance of a company, fund or specified pool of assets.
Insurance contracts and investment contracts with such discretionary participation features are accounted for under IFRS 4, while investment contracts
without discretionary participation features are accounted for as financial instruments under IAS 39.
Judgement is therefore required in order to establish whether any additional benefits in an insurance or investment contract meet the above
requirements for being considered discretionary participation features.
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Consolidation (Notes 42 to 44): Assessment of whether the group controls underlying entities and should therefore consolidate them.
The assessment takes account of various criteria, including decision making ability, equity holding and the rights to a variable return from the entity.
Control arises when the group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity.
For operating entities this generally accompanies a shareholding of 50% or more in the entity. Subsidiaries that are consolidated where the group owns
less than 50% of the ordinary share capital (structured entities), are consolidated based on an assessment of control normally arising from special rights
attaching to the class of share owned, other contractual arrangements and factors such as the purpose of the investee, the nature of its relevant
activities, voting rights (including potential voting rights) and substantive and protective rights.
The group invests in various fund and unit trust entities where it also acts as the asset manager to those entities. In these instances, in determining
whether the group controls the entities, the assessment focuses on the aggregate economic interests of the group (direct interest and expected
management fees) and on whether the group acts as a principal or agent. This includes an assessment of the removal rights of other investors (their
practical ability to allow the group not to control the fund). Additionally, holdings in such investments can fluctuate on a daily basis according to the
participation of the group and other investors in them. As a result, in determining control, we look at an assessment of these factors over a longer period
to mitigate the impact of daily fluctuations which do not reflect the wider facts and circumstances of the group\u2019s involvement. This is performed in line
with the following principles:
\u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity exceeds 50%, the group is judged to have
control over the entity;
\u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity is between 30% and 50%, the facts and
circumstances of the group\u2019s involvement in the entity are considered, including the rights to any fees earned by the asset manager from the entity,
in forming a judgement as to whether the group has control over the entity; and
\u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity is less than 30%, the group is judged to not
have control over the entity, but again the facts and circumstances of the group\u2019s involvement in the entity are considered.
The following sets out information about the critical accounting assumptions made by the group about the future, and other major sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and
liabilities within the next financial year :
Valuation of insurance and investment contract liabilities (Notes 18 to 21)
The key judgements around the valuation of insurance and investment contract liabilities relate to the following assumptions:
\u2022 Determination of the longevity, mortality and morbidity assumptions used in the calculation of the insurance contract liabilities; the assumptions
for the rate of future longevity, mortality and morbidity are based on the group\u2019s internal experience and judgements about how experience may
vary in the future. This assessment takes into account market benchmarking, internal experience studies and independent industry data.
\u2022 Determination of the expense assumptions used in the calculation of the insurance liabilities. These represent the expected future costs of
administering the underlying insurance policies, and are based on management\u2019s best estimate of these future costs, and on an appropriate
allocation between servicing new and existing business.
\u2022 Determination of valuation interest rates used to discount the liabilities, which are sensitive to the assumptions made, for example, on credit default
of the backing assets. These assumptions take into account consideration of market experience and historic internal data. The valuation interest
rate is also sensitive to the selection of assets chosen to back the liabilities.
\u2022 Determination of the target long-term asset portfolio at certain period ends, depending on the quantum and timing of pension risk transfer (PRT)
volumes. This assumption is used to present LGRI and Retail Retirement new business metrics.
Insurance and investment contract liabilities are of a long-term nature, and as such, the ultimate impact of Covid-19 will emerge over a long period of
time. As at 31 December 2022, there was insufficient certainty in more recent data to revise long-term assumptions in response to emerging claims
experience relating to the effects of the pandemic, with the exception of certain short-term allowances in protection contracts.
Note 19 includes a sensitivity analysis on pre-tax group profit and group equity to reasonable alternative assumptions.
Valuation of unquoted illiquid assets and investment property (Note 10)
\u2022 Determination of fair value of unquoted and illiquid assets, and investment property involves judgements in model valuations, through the
incorporation of both observable and unobservable market inputs, which include assumptions that lead to the existence of a range of plausible
valuations for financial assets.
In assessing asset valuation, in line with applicable standards and guidance, the group has both projected the short-term impact on earnings and cash
flows of the current market volatility, while continuing to review the assets\u2019 ability to deliver longer term returns aligned to their investment cases.
Note 10 includes a sensitivity analysis on the fair value of unquoted illiquid assets and investment property to reasonable alternative assumptions .
Legal & General Group Plc\u2002Annual Report and Accounts 2022160 Financial statements
Primary statements and performance
continued
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Defined benefit pension plan (Note 23)
\u2022 Determination of pension plan assumptions including mortality, discount rates and inflation; these assumptions have been set in accordance with the
requirements of IAS 19, \u2018Employee Benefits\u2019 and include consistent judgements with those in setting the annuity liabilities where possible. Note 23 includes
a sensitivity analysis to reasonable alternative assumptions.
(vi) Consideration of climate change
The group is exposed to climate change through two broad categories: transition risks from the move to a low-carbon economy and the impact this
has on asset valuation and the economy; and physical risks from the impact on asset holdings as a result of severe weather events and longer-term
shifts in climate.
The group has integrated climate risk management into its governance framework and has carried out a detailed assessment of how we could expect
climate risk to emerge across our business model. The group risk mitigation strategy includes setting portfolio carbon intensity targets, integrating
carbon controls into the investment processes through stock exclusions and high carbon escalation, corporate engagement and implementing high
energy efficiency standards into the group\u2019s directly owned commercial property and housing businesses.
The group is committed to net zero, targeting a 1.5\u00b0C \u2018Paris\u2019 outcome. In order to meet its environmental goals, the group has set for itself a number
of metrics and targets, clearly linked with its business strategy and risk management controls. These are based on a three-pillar climate strategy
encompassing \u2018Invest, Influence and Operate\u2019. Metrics and targets have been defined around the group\u2019s operational carbon footprint, investment
portfolio economic carbon intensity, and implied portfolio temperature alignment. These are being targeted through the decarbonisation of the
group\u2019s balance sheet, investments in clean energy and start-ups, development of climate friendly investment products, and focus on own operations.
The group also continues to use its influence as a large investor to promote the transition.
Scenario analysis is performed to help understand the strategic implications of possible climate pathways, including the key features of a transition to
a net zero economy. Plausible scenarios have been developed based on estimations of how the energy system may evolve over the next 30 years, using
the most recent carbon budgets from the Intergovernmental Panel on Climate Change\u2019s Sixth Assessment Report (AR6) and incorporate latest data on
technology costs. These include two different pathways to \u2018below 2\u00b0C\u2019, and a scenario assuming achievement of net zero. Given the group\u2019s long-term
climate risk relates to transition risk, a fourth scenario assuming global failure to act on climate change and emissions growth at historical rates has
been modelled, but the impacts have not been applied to our portfolio. Such impacts are driven by physical risks which tend to be highly localised and
manifest further into the future and are therefore more uncertain.
In preparing the consolidated financial statements, the group has considered the impact of climate change, and in particular the transition to a lower
carbon economy, on the valuation of the group\u2019s asset and liabilities. In the strategic report, and more fully in the group\u2019s climate report, we have set
out in detail the various risks and opportunities that are created by this transition, and how they may impact the group across various time horizons. In
the group\u2019s climate report, in line with the recommendations of the Task Force on Climate-related Financial Disclosures, we have further described the
resilience of the group\u2019s strategy, taking into consideration different climate-related scenarios, as described above. There is no one single scenario that
underpins the financial statements. The scenarios help challenge the group\u2019s perspectives on the future business and economic environment as a result
of the transition to a lower carbon economy, including consideration of events that may be only remotely possible. As a result, scenarios included in the
group\u2019s climate report are not intended to be predictions of likely future events or outcomes and are not the basis on which the group\u2019s consolidated
financial statements have been prepared.
At the current time, the group does not consider climate risk to represent a significant area of judgement or of estimation uncertainty. As at 31 December
2022, no material impacts on the group\u2019s financial position, nor on the valuation of assets or liabilities on the group\u2019s Consolidated Balance Sheet as a
result of climate change risk have been identified. In arriving at this determination, the group has in particular taken into account the following areas of
judgement, which we consider to be those most exposed to the potential impact of climate change in the preparation of the financial statements:
Going concern and viability
In preparing the consolidated financial statements, the directors are required to assess the group\u2019s ability to continue as a going concern, by taking into
account all available information related to at least 12 months from the date of their approval. Additionally, the preparation of the viability statement takes
into consideration the group\u2019s overall business model and strategy, forecast financial strength and resilience, and the liquidity profile over the planning
horizon. Climate-related matters have been considered as part of these assessments and have not been deemed to create material uncertainties as to
their conclusions or to require specific disclosure.
Valuation of Level 3 financial investments and investment property
The valuation of unquoted illiquid assets and investment property has been separately identified as an area of significant estimation uncertainty.
The assumptions used in the models underpinning these assets\u2019 valuations, such as cash flows forecasts, discount rates, and multiples, are often
unobservable. Due to the need to apply significant judgements, these assumptions can be impacted by transition risk, with climate-related inputs
gaining more traction (e.g. construction methods and materials, EPC ratings, ESG credentials and climate resilience). This is particularly relevant for
the group\u2019s direct investments portfolio, including alternative assets. Where possible, the group\u2019s assets are valued using standard market pricing
sources or appropriately qualified external valuers, and therefore reflect current market sentiments around climate risk. In this respect market and
investor expectations have also been evolving, with greater demand towards net zero-aligned assets, and away from traditional carbon-intensive
methods, impacting expected investor returns and therefore discount rates and multiples. Exposure to the risks of climate change is minimised, through
rigorous assessment of potential investments and active monitoring of the carbon intensity of the current portfolio. Additionally, investment properties
are being reviewed by independent third parties, where applicable, with regards to potential retrofitting, to help reduce carbon emissions and make
them more efficient and sustainable for the future.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 161
Strategic report Governance Financial statements Other information
Primary statements and performance
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1 Basis of preparation continued
Asset impairment and residual economic life
The carrying value of certain tangible and intangible assets on the Consolidated Balance Sheet which are subject to impairment testing could be affected
by climate change risk. For example, inventory may become obsolete or restricted, causing selling prices to decline or their costs of completion to
increase. If, as a result, the cost of inventories is not recoverable, they would need to be written down to their net realisable value.
Property, plant and equipment, right-of-use assets, goodwill and other intangible assets may see their recoverable amount decrease in light of climate
change, and significant changes in the environment (including for example changes in regulation) in which the group operates, where adverse effects
can represent an indication of impairment. The estimation of recoverable amount as \u2018value in use\u2019 requires an assessment of future expected cash
flows based on assumptions potentially affected by climate related matters, particularly for intangible assets, which are subject to a higher degree of
judgement. Where assets are subject to amortisation or depreciation, consideration needs to be given to whether climate risk suggests that the residual
economic life is shorter than anticipated, which would give rise to increased charges in the income statement. Due to the nature of the group\u2019s tangible
and intangible assets, we do not anticipate any material additional impairments or increased amortisation and depreciation charges to arise from climate
change. Risks will continue to be monitored against judgements and estimates used in the assessment of impairment.
Provisions and contingent liabilities
The recognition, measurement and disclosure of provisions and contingent liabilities is subject to setting assumptions around future events and the
probability of their occurrence. Climate-related matters could affect these elements, for example by requiring recognition or disclosure of a legal
obligation (e.g. levies imposed for failing climate-related targets) or of a constructive obligation (e.g. requirements to remediate environmental damage
caused by the group\u2019s operations and investment portfolios).
Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and unused tax losses and credits, to the extent it is probable that future taxable
profit will be available, against which those amounts can be utilised. Climate-related matters could affect the group\u2019s estimate of future taxable profits,
and therefore it may be required to derecognise deferred tax assets previously on the balance sheet.
Share-based payments
The group\u2019s performance share plans provide a direct and transparent link between executive pay and the delivery of shareholder returns over the
longer-term. They are a conditional award of shares subject to a performance period of at least three years. Performance metrics for the group\u2019s share
plans are now clearly linked to ESG metrics. As such, the effects of climate change could have an impact on amount and timing, recognition and
measurement of amounts in the group\u2019s income statement.
Retirement benefit obligations
Depending on their features, the valuation of plan assets included in the group\u2019s defined benefit pension schemes may be impacted by climate-related
risk, as described above, and therefore the carrying value of the net deficit on the group\u2019s balance sheet could be affected.
Financial instruments
Under IFRS 9, \u2018Financial Instruments\u2019, effective from 1 January 2023, expected credit losses are required to be recognised on receivables and certain
financial investments, representing the counterparty\u2019s probability of default over a certain time horizon. Climate-related matters may affect the group\u2019s
exposure to these losses, for example by negatively affecting the borrower\u2019s ability to meet their obligations, or by affecting assumptions used in the
models adopted to estimate expected credit losses.
(vii) Consolidation principles
Subsidiary undertakings
The consolidated financial statements incorporate the assets, liabilities, equity, income, expenses and cash flows of the company and of its subsidiary
undertakings drawn up to 31 December each year. All intra-group balances, transactions, income and expenses are eliminated in full.
Subsidiaries are those entities (including special purpose entities, mutual funds and unit trusts) over which the group directly or indirectly has control (i.e.
when the group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its
power over the investee) (Note 42). Profits or losses of subsidiary undertakings sold or acquired during the year are included in the consolidated results
up to the date of disposal or from the date of gaining control. Puttable instruments held by external parties in consolidated investment vehicles, such as
unit trusts, are classified as liabilities and appear as \u2018Net asset value attributable to unit holders\u2019 in the Consolidated Balance Sheet.
Legal & General Group Plc\u2002Annual Report and Accounts 2022162 Financial statements
Primary statements and performance
continued
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Associates and joint ventures
The group has interests in associates and joint ventures (Note 43) which form part of an investment portfolio held through private equity vehicles, mutual
funds, unit trusts and similar entities. In accordance with the choice permitted by IAS 28, \u2018Investments in associates\u2019, these interests have been classified
as fair value through profit or loss and measured at fair value within financial investments, with changes in fair value recognised in the Consolidated
Income statement.
Associates and joint ventures which do not form part of an investment portfolio are initially recognised in the Consolidated Balance Sheet at cost.
The carrying amount of these investments is increased or decreased to reflect the group\u2019s share of total comprehensive income after the date of
the acquisition .
(viii) Product classification
The group\u2019s products are classified for accounting purposes as either insurance or investment contracts. The basis of accounting for these products is
outlined in Notes 20 and 21 respectively. The following table summarises the classification of the group\u2019s significant types of non-participating insurance
and investment contracts as well as investment products as described in Note 6 for each applicable reportable segment.
Reportable segment Non-participating insurance contracts Non-participating investment contracts and investment products
LGRI \u2022 Pension risk transfers
\u2022 Longevity insurance
\u2022 Assured payment policies
Retail \u2022 UK Retail protection
\u2022 UK Group protection
\u2022 US protection
\u2022 US Universal life
\u2022 Individual annuities
\u2022 Lifetime Care Plan
\u2022 Lifetime mortgages
\u2022 Fixed term individual annuities
\u2022 Retirement interest only mortgages
\u2022 Workplace savings
LGIM \u2022 Institutional Pension
\u2022 Segregated investment management mandates
\u2022 Collective Investment Schemes
(ix) Fiduciary activities
Assets associated with fiduciary activities and the income arising from those assets, together with associated commitments to return such assets
to customers, are not included in these financial statements. Where the group acts in a fiduciary capacity, for instance as a trustee or agent, it has
no contractual rights over the assets concerned.
(x) Foreign exchange and exchange rates
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. The
functional currency of the group\u2019s foreign operations is the currency of the primary economic environment in which the entity operates. The assets
and liabilities of all of the group\u2019s foreign operations are translated into sterling, the group\u2019s presentation currency, at the closing rate at the date of the
Consolidated Balance Sheet. Income and expenses are translated at average exchange rates. On consolidation, exchange differences arising from the
translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are
taken to a separate component of shareholders\u2019 equity.
Foreign exchange gains and losses are recognised in the Consolidated Income Statement, except when recognised in equity as qualifying cash flow
or net investment hedges.
The closing exchange rates at 31 December 2022 were 1.21 United States dollar and 1.13 euro (31 December 2021: 1.35 United States dollar and 1.19 euro).
The average exchange rates for the year ended 31 December 2022 were 1.24 United States dollar and 1.17 euro (31 December 2021: 1.38 United States
dollar and 1.16 euro).
Legal & General Group Plc\u2002Annual Report and Accounts 2022 163
Strategic report Governance Financial statements Other information
Primary statements and performance
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2 Supplementary adjusted operating profit information
(i) Reconciliation between adjusted operating profit and profit from ordinary activities after tax
Profit/ Profit/ Profit/ Profit/
(loss) Tax (loss) (loss) Tax (loss)
before (expense)/ after before (expense)/ after
tax credit tax tax credit tax
2022 2022 2022 2021 2021 2021
Notes \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Legal & General Retirement Institutional (LGRI)
1
2(iii) 1,257 (179) 1,078 1,154 (170) 984
Legal & General Capital (LGC) 509 (105) 404 461 (82) 379
Legal & General Investment Management (LGIM) 340 (47) 293 422 (80) 342
Retail 2(iii) 825 (155) 670 620 (90) 530
\u2013 Insurance
2
341 (88) 253 268 (41) 227
\u2013 Retail Retirement
1
484 (67) 417 352 (49) 303
Adjusted operating profit from divisions/(tax expense)
on divisions 2,931 (486) 2,445 2,657 (422) 2,235
Group debt costs
3
(214) 41 (173) (230) 44 (186)
Group investment projects and expenses (194) 42 (152) (165) 28 (137)
Adjusted operating profit/(tax expense) 2,523 (403) 2,120 2,262 (350) 1,912
Investment and other variances 2(iv) 137 34 171 233 (95) 138
Losses on non-controlling interests (1) \u2013 (1) (7) \u2013 (7)
Profit for the year/(tax expense) for the year
4
2,659 (369) 2,290 2,488 (445) 2,043
1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core
businesses. Prior year comparatives have been restated to reflect this change in segmentation. Further details are provided in Note 28.
2. Insurance operating profit includes \u00a3168m (2021: \u00a3(52)m) related to the group\u2019s US Insurance business.
3. Group debt costs exclude interest on non-recourse financing.
4. Profit/(loss) before tax reflects the adjusted profit before tax attributable to equity holders.
This supplementary adjusted operating profit information (one of the group\u2019s key performance indicators) provides additional analysis of the results
reported under IFRS, and the group believes it provides stakeholders with useful information to enhance their understanding of the performance of the
business in the year.
Adjusted operating profit measures the pre-tax result excluding the impact of investment volatility, economic assumption changes caused by
changes in market conditions or expectations and exceptional items. It therefore reflects longer-term economic assumptions for the group\u2019s insurance
businesses and shareholder funds, including the traded portfolio in LGC. For the group\u2019s direct investments, operating profit reflects the expected
long-term economic return for those assets which are developed with the intention of sale, or the IFRS profit before tax for the early stage and mature
businesses. Variances between actual and long-term expected investment return on traded and real assets (including direct investments where
applicable) are excluded from operating profit, as well as economic assumption changes caused by changes in market conditions or expectations
(e.g. credit default and inflation) and any difference between the actual allocated asset mix and the target long-term asset mix on new pension risk
transfer business. Adjusted operating profit also excludes the yield associated with assets held for future new pension risk transfer business from the
valuation discount rate on insurance contract liabilities. Exceptional income and expenses which arise outside the normal course of business in the year,
such as merger and acquisition and start-up costs, are also excluded from adjusted operating profit.
The group reports its results across the following business segments:
\u2022 LGRI represents worldwide pension risk transfer business including longevity insurance.
\u2022 LGC represents shareholder assets invested in direct investments primarily in the areas of specialist commercial real estate, clean energy, housing
and SME finance, as well as traded and treasury assets.
\u2022 LGIM represents institutional and retail investment management.
\u2022 Insurance primarily represents UK protection (both group and retail) and Fintech business, as well as US retail protection business (US Insurance).
\u2022 Retail Retirement primarily represents retail annuity and drawdown products, workplace savings and lifetime mortgage loans.
Legal & General Group Plc\u2002Annual Report and Accounts 2022164 Financial statements
Primary statements and performance
continued
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(ii) Reconciliation of release from operations to adjusted operating profit before tax New Operating Release business Net release Changes in Operating Tax profit/(loss) from surplus/ from Experience valuation Non-cash profit/(loss) expense/ before operations 1 (strain) operations variances assumptions items Other 2 after tax Fortheyearended (credit) tax 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m LGRI 3 620 298 918 (15) 177 (2) \u2013 1,078 179 1,257 LGC 404 \u2013 404 \u2013 \u2013 \u2013 \u2013 404 105 509 LGIM 293 \u2013 293 \u2013 \u2013 \u2013 \u2013 293 47 340 Retail 554 (4) 550 (45) 205 (16) (24) 670 155 825 \u2013 Insurance 308 (12) 296 (12) 7 (14) (24) 253 88 341 \u2013 Retail Retirement 3 246 8 254 (33) 198 (2) \u2013 417 67 484 Total from divisions 1,871 294 2,165 (60) 382 (18) (24) 2,445 486 2,931 Group debt costs (173) \u2013 (173) \u2013 \u2013 \u2013 \u2013 (173) (41) (214) Group investment projects and expenses (73) \u2013 (73) \u2013 \u2013 \u2013 (79) (152) (42) (194) Total 1,625 294 1,919 (60) 382 (18) (103) 2,120 403 2,523 1. Release from operations within Insurance includes \u00a385m of dividends from the US Insurance business. 2. Other within Insurance includes experience variances, changes in valuation assumptions (including changes to assumed asset allocation) and non-cash items for US Insurance. 3. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Further details are provided in Note 28. Release from operations for LGRI, and the UK protection and retail annuity businesses within Retail represents the expected IFRS surplus generated in the year from the difference between the prudent assumptions underlying the IFRS liabilities and our best estimate of future experience. For workplace savings within Retail Retirement, the release from operations represents the expected annual management charges generated from the in-force business less expected expenses. The Insurance release from operations also includes dividends remitted from US Insurance business and IFRS profit after tax for the Fintech business. New business surplus/(strain) for LGRI, and the UK protection and retail annuity businesses within Retail represents the initial profit or loss from writing new business. This includes the costs associated with acquiring new business and setting up prudent reserves, net of tax. Similarly for workplace savings, this includes the cost of acquiring new business in the year less the annual management charges generated by the assets under administration (AUA), net of tax. The new business surplus and release from operations for LGRI and Retail excludes any capital held in excess of the prudent reserves from the liability calculation. LGRI and Retail Retirement\u2019s annuity new business metrics are presented based on a single target long-term asset portfolio. At certain year ends, depending upon the quantum and timing of pension risk transfer (PRT) volumes, we may have sourced more or less of the high quality assets targeted to support that business. At year end, the profit impact of the difference between actual assets held (including alternative surplus assets where suitable) and the long-term asset mix is reflected in investment variance. Net release from operations for LGRI and Retail is defined as release from operations plus new business surplus/(strain). Release from operations and net release from operations for LGC and LGIM represents the adjusted operating profit (net of tax). See Note 2 (iii) for more detail on experience variances, changes to valuation assumptions and non-cash items 2 Supplementary adjusted operating profit information continued (ii) Reconciliation of release from operations to adjusted operating profit before tax continued New business surplus/ (strain) Net release from operations Changes in valuation assumptions Operating profit/(loss) after tax Operating profit/(loss) before tax Release from operations 1 Experience variances Non-cash items Other 2 Tax expense/ (credit) For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m LGRI 3 512 193 705 40 212 27 \u2013 984 170 1,154 LGC 379 \u2013 379 \u2013 \u2013 \u2013 \u2013 379 82 461 LGIM 342 \u2013 342 \u2013 \u2013 \u2013 \u2013 342 80 422 Retail 463 54 517 28 121 2 (138) 530 90 620 \u2013 Insurance 236 27 263 14 82 6 (138) 227 41 268 \u2013 Retail Retirement 3 227 27 254 14 39 (4) \u2013 303 49 352 Total from divisions 1,696 247 1,943 68 333 29 (138) 2,235 422 2,657 Group debt costs (186) \u2013 (186) \u2013 \u2013 \u2013 \u2013 (186) (44) (230) Group investment projects and expenses (69) \u2013 (69) \u2013 \u2013 \u2013 (68) (137) (28) (165) Total 1,441 247 1,688 68 333 29 (206) 1,912 350 2,262 1. Release from operations within Insurance includes \u00a380m of dividends from the US Insurance business. 2. Other within insurance includes experience variances, changes in valuation assumptions (including changes to assumed asset allocation) and non-cash items for US Insurance. 3. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. Further details are provided in Note 28. (iii) Analysis of LGRI and Retail adjusted operating profit LGRI 1 Retail 1 LGRI 1 Retail 1 2022 2022 2021 2021 For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Net release from operations 918 550 705 517 Experience variances \u2013 Persistency (1) (7) 1 (5) \u2013 Mortality/morbidity 37 17 24 29 \u2013 Expenses (15) (15) 6 (1) \u2013 Project and development costs (16) (6) (11) (19) \u2013 Other (20) (34) 20 24 Total experience variances (15) (45) 40 28 Changes in valuation assumptions \u2013 Persistency \u2013 (10) \u2013 (5) \u2013 Mortality/morbidity 2,3 174 229 153 46 \u2013 Expenses \u2013 (13) \u2013 (1) \u2013 Other 4 3 (1) 59 81 Total changes in valuation assumptions 177 205 212 121 Movement in non-cash items (2) (16) 27 2 Other 5 \u2013 (24) \u2013 (138) Operating profit after tax 1,078 670 984 530 Tax expense 179 155 170 90 Operating profit before tax 1,257 825 1,154 620 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. Further details are provided in Note 28. 2. The positive impact of changes in Mortality/morbidity valuation assumptions in Retail is driven by routine longevity assumption changes in 2022, for which an update to the base mortality assumption is the largest component of the movement. We have adopted a modified CMI 2020 model, with no weight given to 2020 data due to the uncertainty in the data created by Covid-19. 3. In both 2022 and 2021, changes in valuation assumptions for Mortality/morbidity in LGRI reflect updates to UK longevity trend and spouse demography assumptions. 4. In 2021, the \u00a381m positive Other changes in valuation assumptions in Retail reflected the benefit of modelling improvements in UK retail protection, including the introduction of an illiquidity premium in the liability discount rate. 5. Other includes experience variances, changes in valuation assumptions (including changes to assumed asset allocation) and non-cash items relating to US Insurance, which also includes the benefits from reinsuring the in-force universal life book of protection business . Legal & General Group Plc\u2002Annual Report and Accounts 2022166 Financial statements Primary statements and performance continued 13.2_Financial_statements_v3.indd 16613.2_Financial_statements_v3.indd 166 14/03/2023 20:2114/03/2023 20:21
(iv) Investment and other variances
2022 2021
\u00a3m \u00a3m
Investment variance related to protection liabilities
1
841 111
Investment variance related to the traded investment portfolio and direct investments
2
(408) 19
Other investment variance
3
(164) 211
Investment variance 269 341
M&A related and other variances
4
(132) (108)
Total investment and other variances 137 233
1. The positive investment variance in protection liabilities of \u00a3841m reflects the formulaic impact of the increases in UK and US government bond yields which have resulted in higher
discount rates being used to calculate the group\u2019s protection liabilities.
2. The negative investment variance in the traded investments portfolio and direct investments of \u00a3408m largely reflects volatile global equity market performance in the traded investment
portfolio, as well as the revaluation of some land assets and development projects as a result of higher interest rates.
3. Other investment variance includes the IAS 19 movements in respect of the group\u2019s defined benefit pension schemes.
4. M&A related and other variances include gains and losses, expenses and intangible amortisation relating to acquisitions, disposals and restructuring as well as business start-up costs.
Investment variance includes differences between actual and long-term expected investment return on traded and real assets (including direct
investments developed with the intention of sale), the impact of economic assumption changes caused by changes in market conditions or expectations
(e.g. credit default and inflation), the impact of any difference between the actual allocated asset mix and the target long-term asset mix on new pension
risk transfer business, and the yield associated with assets held for future new pension risk transfer business from the valuation discount rate.
The long-term expected investment return is based on opening economic assumptions applied to the assets under management at the start of the
reporting year. The assumptions underlying the calculation of the expected returns for traded equity, commercial property and residential property are
based on market consensus forecasts and long-term historic average returns expected to apply through the cycle.
The long-term expected investment returns are:
2022 2021
Equities 7% 7%
Commercial property 5% 5%
Residential property
1
3.5% RPI + 50bps
1. In previous years the assumption RPI + 50bps was in line with average historical returns. Due to the current spike in inflation and in order to keep the rate aligned to average historical
returns, it was updated to 3.5% in 2022.
Additionally, the LGC alternative asset portfolio comprises investments in specialist commercial real estate, clean energy, housing and SME finance. The
long-term expected investment return across the portfolio is on average between 10% and 12% (2021: 8% and 10%), in line with our stated investment
objectives. Rates of return specific to each asset are determined at the point of underwriting and reviewed and updated annually. The expected
investment return includes assumptions on appropriate discount rates and inflation as well as sector specific assumptions including retail and
commercial property yields and power prices.
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3 Other expenses
An analysis of other expenses is set out below:
2022 2021
Notes \u00a3m \u00a3m
Staff costs (including pension costs and share-based payments) 32 1,194 1,014
Redundancy costs 4 4
Lease rentals
1
\u2013 4
Auditor\u2019s remuneration 31 18 12
Depreciation and impairment of plant and equipment 57 53
Amortisation and impairment of other intangible assets 9 46 89
House building expenses
2
1,123 1,072
Other administrative expenses 890 860
Total other expenses 3,332 3,108
1. Lease rentals represent expenses on short-term leases or low value leases.
2. House building expenses represent the cost of sales of the group\u2019s housing businesses, including CALA Homes. A total of \u00a31,429m (2021: \u00a31,314m) of house building income has been
recognised in the year (see Note 28 (ii) (d)).
4 Dividends
Interim dividends on ordinary shares are deducted from retained earnings in the period in which they are paid. Final dividends on ordinary shares
are recognised as a liability in the period in which they have been approved by shareholders of the company.
Dividend Per share
1
Dividend Per share
1
2022 2022 2021 2021
\u00a3m p \u00a3m p
Ordinary dividends paid and charged to equity in the year:
\u2013 Final 2020 dividend paid in June 2021 \u2013 \u2013 754 12.64
\u2013 Interim 2021 dividend paid in September 2021 \u2013 \u2013 309 5.18
\u2013 Final 2021 dividend paid in June 2022 792 13.27 \u2013 \u2013
\u2013 Interim 2022 dividend paid in September 2022 324 5.44 \u2013 \u2013
Total dividends 1,116 18.71 1,063 17.8 2
Ordinary share dividend proposed 829 13.93 790 13.27
1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date.
Subsequent to 31 December 2022, the directors declared a final dividend for 2022 of 13.93 pence per ordinary share. This dividend will be paid on
5 June 2023. It will be accounted for as an appropriation of retained earnings in the year ended 31 December 2023 and is not included as a liability
in the Consolidated Balance Sheet as at 31 December 2022.
Legal & General Group Plc\u2002Annual Report and Accounts 2022168 Financial statements
Primary statements and performance
continued
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5 Earnings per share
Earnings per share is a measure of the portion of the group\u2019s profit allocated to each outstanding share. It is calculated by dividing net income
attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the year, excluding employee scheme
treasury shares. For this purpose, net income is defined as the profit after tax, attributable to equity holders of the company, derived from
continuing operations.
For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted
to assume conversion of all dilutive potential ordinary shares, such as share options granted to employees. Potential or contingent share issuances
are treated as dilutive when their conversion to shares would decrease net earnings per share.
(i) Basic earnings per share
After tax Per share
1
After tax Per share
1
2022 2022 2021 2021
\u00a3m p \u00a3m p
Profit for the year attributable to equity holders 2,291 38.72 2,050 34.58
Less: coupon payable in respect of restricted Tier 1 convertible notes net of tax relief (23) (0.39) (23) (0.39)
Total basic earnings 2,268 38.33 2,027 34.19
1. Basic earnings per share is calculated by dividing profit after tax by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares.
(ii) Diluted earnings per share
After tax
Weighted
average
number of
shares Per share
1
2022 2022 2022
\u00a3m m p
Profit for the year attributable to equity holders 2,291 5,917 38.72
Net shares under options allocable for no further consideration \u2013 55 (0.36)
Conversion of restricted Tier 1 notes \u2013 307 (1.87)
Total diluted earnings 2,291 6,279 36.49
Weighted
average
number of
After tax shares Per share
1
2021 2021 2021
\u00a3m m p
Profit for the year attributable to equity holders 2,050 5,929 34.58
Net shares under options allocable for no further consideration \u2013 59 (0.34)
Conversion of restricted Tier 1 notes \u2013 307 (1.67)
Total diluted earnings 2,050 6,295 32.57
1. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all potential
ordinary shares, such as share options granted to employees and conversion of restricted Tier 1 notes.
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6 Principal products
A significant part of the group\u2019s business involves the acceptance and management of risk.
A description of the principal products offered by the group\u2019s segments is outlined below. The group seeks to manage its exposure to risk through
controls which ensure that the residual exposures are within acceptable tolerances agreed by the Board. The group\u2019s risk appetite framework and the
methods used to monitor risk exposures can be found on pages 52 to 59.
Details of the risks associated with the group\u2019s principal products and the controls used to manage these risks can be found in Notes 7 and 15 to 17.
Legal & General Retirement Institutional (LGRI)
Annuity contracts
Pension Risk Transfer (PRT) represents bulk annuities, whereby the group accepts the assets and liabilities of a company pension scheme or a life
fund. Annuities provide guaranteed income for a specified time, usually the life of the policyholder and may include a guaranteed payment period.
PRT business consists of both immediate and deferred annuities.
Immediate annuities provide a regular income stream to the policyholder and are in payment at the date of the transaction.
Deferred annuities provide a regular income stream to the policyholder where the income stream starts at a future date after the transaction. Some
deferred contracts accepted by the group contain guaranteed cash options, predominantly minimum factors for commuting part of the annuity
income into cash at the date of vesting.
There is a block of immediate and deferred annuities within the UK business with benefits linked to changes in the RPI or for a minority the CPI, but with
contractual maximum or minimum increases. Impact on profit due to changes in inflation can be found within the IFRS sensitivity analysis note.
Investment contracts
The group writes Assured Payment Policies (APP). An APP is a long-term contract under which the policyholder (a registered UK pension scheme)
pays a day-one premium and in return receives a contractually fixed and/or inflation-linked set of payments over time from the insurer.
Longevity insurance contracts
The group also provides longevity insurance products for company pension schemes, under which regular payments are made to the scheme reflecting
their actual longevity experience, while the scheme makes an agreed set of regular payments in return. Some policies contain a guaranteed surrender
value which is currently immaterial.
Legal & General Investment Management (LGIM)
LGIM offers both active and passive management on either a pooled or segregated basis to clients domiciled globally. Assets are managed in London
and Chicago on behalf of pension funds, institutional clients, sovereign wealth clients, retail clients and subsidiary companies within the group.
The key products provided by LGIM are unit linked Institutional Pensions, Segregated investment management mandates and Collective Investment Schemes.
The core strategies applied for managing the products are set out below.
Index fund management
LGIM provides a diversified range of pooled index funds, providing a wide choice and the ability to pursue specific benchmarks efficiently. In addition,
segregated solutions are offered to institutional clients providing large scale customisation against established market capitalisation weighted and
alternative indices.
The LGIM ETF business provides clients access to LGIM\u2019s index fund management capabilities via our Exchange Traded Fund platform. ETF products
cover a broad range of traditional and thematic asset classes.
Active strategies
LGIM offers a range of pooled and segregated active fixed income funds. The LGIM liquidity funds offer institutional investors a solution for their cash
management requirements across a range of core currencies. The liquidity funds aim to deliver competitive returns with a high level of diversification,
whilst focusing on capital preservation through portfolios of high quality, liquid assets.
Active strategies also includes an active equity management business comprising focused teams managing stock selection across different regions.
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Solutions and Liability Driven Investment (LDI)
LGIM provides a range of pooled and bespoke solutions to help de-risk defined benefit pension schemes. These solutions will usually combine active
or passive underlying portfolios with derivative overlays designed to meet clients\u2019 specific requirements. An allocation strategy service is also offered
to institutional clients, which may also allocate some of the portfolio to managers other than LGIM.
Multi-asset funds
Multi-asset funds for retail and institutional clients, built using LGIM\u2019s expertise in asset allocation which is informed by an in-house research capability.
The underlying asset classes may be managed on an active or passive basis within LGIM.
Real assets
LGIM offers a range of pooled funds, segregated accounts and joint ventures investing on behalf of UK and overseas investors across physical real
estate, private corporate debt, infrastructure debt and real estate loans. The business has specialist teams of fund and asset managers and an in-house
research team.
Legal & General Capital (LGC)
Investment strategy and implementation
Legal & General Capital manages shareholder assets which are not directly required to meet contractual obligations to policyholders. LGC\u2019s investments
fall into two distinct categories; direct investments and traded assets. The value of, and income from, both categories is sensitive to conditions within
investment markets and the broader economy. Potential volatility in returns is managed using a range of techniques, including foreign exchange and
interest rate hedging, and exposure concentration limits by asset type, sector and geographic region.
Direct investments and structuring
Direct investments are an integral part of the wider group strategy. LGC\u2019s direct investments are typically illiquid investments entered into through
acquisition, joint venture with strategic partners or by the creation of new companies. LGC seeks to make direct investments in sectors where there are
structural funding shortfalls, and is organised into four sectors: specialist commercial real estate, clean energy, housing and SME finance. LGC deploys
capital and sector expertise to such investments to target attractive risk-adjusted returns which can deliver higher returns and/or lower volatility for
our shareholder capital than listed equity.
Retail
The Retail division comprises Insurance and Retail Retirement businesses.
UK protection business (retail and group)
The group offers protection products which provide mortality or morbidity benefits. They may include health, disability, critical illness and accident
benefits; these additional benefits are commonly provided as supplements to main life policies but can also be sold separately. The benefit amounts
would usually be specified in the policy terms. Some sickness benefits cover the policyholder\u2019s mortgage repayments and are linked to the prevailing
mortgage interest rates. In addition to these benefits, some contracts may guarantee premium rates, provide guaranteed insurability benefits and offer
policyholders conversion options.
US protection business
US protection represents individual term assurance, which provides death benefits over the medium to long-term. The contracts have level premiums
for an initial period with premiums set annually thereafter. During the initial period, there is generally an option to convert the contract to a universal life
contract. After the initial period, the premium rates are not guaranteed, but cannot exceed the age-related guaranteed premium.
US universal life
Universal life contracts written by LGA provide savings and death benefits over the medium to long-term. The savings element has a guaranteed
minimum growth rate. LGA has exposure to loss in the event that interest rates decrease and it is unable to earn enough on the underlying assets to
cover the guaranteed rate. LGA is also exposed to loss should interest rates increase, as the underlying market value of assets will generally fall
without a change in the surrender value.
Reinsurance is used within the protection businesses to manage exposure to large claims for individual term business and virtually all universal life
business. These practices lead to the establishment of reinsurance assets on the group\u2019s balance sheet. Within our US business, Legal & General
America (LGA), reinsurance and securitisation are also used to provide regulatory solvency relief (including relief from regulation governing term
insurance).
Annuities
Immediate annuities have similar characteristics as products sold by LGRI. The group also offers products for individuals that provide a guaranteed
level of income over a chosen fixed period of time, in exchange for an initial lump sum payment from the policyholder. The products can provide a
fixed lump sum at maturity and/or options to surrender on non-guaranteed terms.
Deferred annuity contracts written by LGA contain a provision that, at maturity, a policyholder may move the account value into an immediate annuity,
at rates which are either those currently in effect, or rates guaranteed in the contract.
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6 Principal products continued
Lifetime Care Plan
The Lifetime Care Plan provides a monthly payment to a UK registered care provider that helps meet the cost of care for the policyholder\u2019s life.
A policyholder can choose to receive a fixed monthly payment or opt to have escalation built in. A death benefit exists within the product so that
if a policyholder dies within the first 6 months of the start date a percentage of the original premium less any payments already made is payable
to the estate.
Lifetime mortgages
Lifetime mortgages are a form of equity release mortgage that provide non-commercial borrowers with a loan secured against their main residence,
without the need for regular repayments. They are regulated retail mortgages offered only to borrowers over the age of 55 through specialist
intermediaries. Interest accrues over the term of the loan and is repayable at the time the principal becomes due. Loans can be advanced in a single
lump sum amount or in several subsequent drawdowns of an agreed facility. All lifetime mortgages provide a \u2018no negative equity\u2019 guarantee, which
means that if the loan is repaid from the sale of the property and if the net sale proceeds are lower than the balance of the loan, the group will accept
the net sale proceeds as full settlement.
Retirement Interest-Only mortgages
A Retirement Interest-Only (RIO) mortgage is a standard residential mortgage available for non-commercial borrowers above 55 years old. A RIO
mortgage is very similar to a standard interest-only mortgage, with two key differences:
\u2022 The loan is usually only paid off on death, move into long-term care or sale of the house.
\u2022 The borrowers only have to prove they can afford the monthly interest repayments and not the capital remaining at the end of the mortgage term.
No repayment solution is required as repayment defaults to sale of property.
Workplace Savings
Workplace Savings provides corporate pension scheme solutions to enable companies to meet their auto-enrolment obligations. Workplace Savings
acts as scheme operator and administrator for these products while the customers hold the individual or scheme level pension policies issued by
Legal and General Assurance Society Limited (LGAS).
7 Asset risk
The group is exposed to the following categories of asset risk as a consequence of offering the principal products outlined in Note 6. The group is
also exposed to insurance risk as a consequence of offering these products \u2013 more detail on insurance risk can be found in Note 17.
The group is not directly exposed to any market risk, credit risk or liquidity risk associated with LGIM\u2019s businesses, and as a result, the detailed risk
disclosures have not been presented. However, LGIM\u2019s income is related to the value of funds under management, and so they are indirectly exposed
to market risks that impact the value of assets underlying those funds.
The group seeks to manage its exposures to risk through controls which ensure that the residual risk exposures are within acceptable tolerances agreed
by the Board. A description of the risks associated with the group\u2019s principal products and the associated controls is detailed in the table below.
Market risk
Exposure to loss as a direct or indirect result of fluctuations in the value of, or income from, specific assets.
Credit risk
Exposure to loss if another party fails to perform its financial obligations to the group.
Liquidity risk
The risk that the group, though solvent, either does not have sufficient financial resources available to enable it to meet its obligations as they fall due,
or can secure them only at excessive cost.
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Market risks
Principal risks Business segment Controls to mitigate risks
Investment performance risk
The group is exposed to the risk that the income from,
and value of, assets held to back insurance liabilities
and capital requirements do not perform in line with
investment and product pricing assumptions leading
to a potential financial loss.
Retail, LGRI and LGC Models are used to assess the impact of a range of future return scenarios
on investment values and associated liabilities in order to determine optimum
portfolios of invested assets. For annuities, which are sensitive to interest rate
and inflation risk, analysis of the liabilities is undertaken to create a portfolio of
securities, the value of which changes in line with the value of liabilities when
interest rates change.
For unit linked contracts, there is a risk of volatility in
asset management fee income due to the impact of
interest rate and market price movements on the fair
value of the assets held in the linked funds, on which
investment management fees are based. There is
also the risk of expense over-runs should the market
depress the level of charges which could be imposed.
Retail and LGIM The risk is managed through maintaining a diversified range of funds in which
customers may invest. The performance of linked investment funds relative
to their investment objectives is subject to regular monitoring. Periodic
assessment is also made of the long-term profitability to the group of
these funds. For some contracts the group has discretion over the level
of management charges levied.
Property risk
Lifetime mortgages include a no-negative equity
guarantee which transfers a potential loss exposure
to the group as a result of low house price inflation
and an exposure to specific properties which
may experience lower house price inflation for
whatever reason.
Retail and LGRI To mitigate the risk, maximum loan to value ratios are set for all lending with
further underwriting criteria setting out acceptable properties for lending
purposes. Policy terms also require properties to be fully insured and
maintained, including the right of inspection. The diversification of lending by
property type and geographic region seeks to control exposures to specific
aspects in the property market.
LGC businesses build homes across the residential
market, invest in large commercial and residential
development projects and manage several developed
real estate assets. The group\u2019s revenue streams are
exposed to residential sales achieved, as well as
the volume of transactions, both of which may be
affected by the performance of the housing market.
Revenue streams may also be impacted by significant
increases in the cost of raw materials or disruption to
supply chains. Independent valuations of real estate
assets, either in development or developed, also
depend on an assessment of the wider real
estate market.
LGC Diversification by geographic region and property type avoids concentration
of exposures to specific areas of the property market. Sites are developed in
a number of phases to spread the risk to local markets over several years and
where possible we seek to co-invest with local experts to manage assets.
The purchasing of new land for development requires approval from LGC\u2019s
Investment Committee and the Group Capital Committee. Where appropriate,
key methods are adopted to further manage the risk, such as fixed price
construction contracts, forward sales and pre-letting. These businesses
can also benefit from flexible funding arrangements available from the group.
Independent valuations of real estate assets, either in
development or developed, also depend on an
assessment of the wider real estate market.
Retail and LGRI Diversification by geographic region and property type avoids concentration
of exposures to specific areas of the property market.
Currency risk
To diversify credit risk within the annuities business
corporate bond portfolio, investments are held
in corporate bonds denominated in non-sterling
currencies. LGC also invest in overseas assets.
Fluctuations in the value of, or income from, these
assets relative to liabilities denominated in sterling
could result in unforeseen foreign exchange losses.
Retail, LGRI and LGC To mitigate the risk of loss from currency fluctuations, currency swaps and
forwards are used to hedge exposures to corporate bonds and equities
denominated in currencies other than sterling. Hedging arrangements are
placed with strongly rated counterparties with collateral requirements being
subject to regular review and reconciliation with the counterparties. The hedges
do not eliminate all currency risk and the group retains some residual risk.
The consolidated international subsidiaries and
financial instruments of subsidiaries are translated
into sterling in the consolidated accounts. Changes in
the sterling value can impact consolidated equity but
may be mitigated by associated hedging transactions.
Group To mitigate the risk of loss from currency translation the company continuously
monitors its exposure and executes appropriate hedging transactions when
necessary. Hedging arrangements are placed with strongly rated counterparties
with collateral requirements being subject to regular review and reconciliation
with the counterparties.
Inflation risk
Inflation risk is the potential of realising a loss because
of relative or absolute changes in inflation rates.
Annuity contracts may provide for future benefits to
be paid taking account of changes in the level of
inflation. Annuity contracts in payment may include
an annual adjustment for movements in price indices.
Retail and LGR The investment strategy for the annuities business takes explicit account of the
effect of movements in price indices on contracted liabilities. Significant
exposures that may adversely impact profitability are hedged using inflation
swaps. Annuity contracts also typically provide for a cap and floor on the annual
increase in inflation linked benefit payments. The hedges do not eliminate all
inflation risk and the group retains some residual risk.
Interest rate risk
Interest rate risk is the risk that the group is exposed
to lower returns or loss as a direct or indirect result of
fluctuations in the value of, or income from, specific
assets and liabilities arising from changes in
underlying interest rates.
Retail, LGRI, LGC
and Group
To mitigate the risk that guarantees and commitments are not met, financial
instruments are purchased, which broadly match the nature and terms of the
expected policy benefits payable. The composition of the investment portfolio
is governed by the nature of the insurance or savings liabilities, the expected rate
of return applicable on each class of asset and the capital available to meet the
price fluctuations of each asset class, relative to the liabilities they support.
Assets which are not backing liabilities are hedged in line with the Group\u2019s overall
tolerance for interest rate risk. The asset-liability matching and hedging do not
eliminate all interest rate risk and the group retains some residual risk.
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7 Asset risk continued
Credit risk
Principal risks Business segment Controls to mitigate risks
Bond default risk
A significant portfolio of corporate and infrastructure
bonds and commercial loans are held to back the
liabilities arising from writing insurance and annuities
business. Whilst the portfolio is diversified, the
asset class is inherently exposed to the risk of
issuer default, with the possibility of financial loss.
LGC is also exposed to the risk of issuer default
through its investment in European private credit
manager, Pemberton.
Retail, LGRI and LGC Portfolio level and specific issuer limits are set by financial strength rating,
sector and geographic region to limit exposure to a default event. Exposures
are regularly reviewed to take account of changes in market conditions, sector
performance and the re-assessment of financial strength by rating agencies
and the group\u2019s own internal analysis. Exposures are monitored relative to limits.
If appropriate, actions are taken to trade out investments at risk of default \u2013 in
some instances financial instruments may also be used to mitigate the impact
of rating downgrades and defaults.
Reinsurance counterparty risk
Exposure to insurance risk is mitigated by ceding part
of the risks assumed to the reinsurance market.
Default of a reinsurer would require the business to be
re-brokered potentially on less advantageous terms,
or for the risks to be borne directly resulting in
possible financial loss. The group is required to carry
an element of associated credit risk capital on its
balance sheet should the business not be re-brokered
on the same terms.
Retail and LGRI When selecting new reinsurance partners for its protection business, the
group considers only companies which have a minimum credit rating equivalent
to A- from Standard & Poor\u2019s. For each reinsurer, exposure limits are determined
based on credit ratings and projected exposure over the term of the treaty.
Actual exposures are regularly monitored relative to these limits. Similarly,
for longevity and credit risk syndication transactions, the group targets
the use of strongly rated counterparties and seeks to ensure that positions
are fully collateralised. The adequacy and quality of collateral is subject to
ongoing monitoring.
Property lending counterparty risk
As part of our asset diversification strategy, we hold
commercial property loans and sale and leaseback
investments. We are inherently exposed to the risk of
default by a borrower or tenant.
Retail and LGRI Each property lending and sale and leaseback investment transaction is
subject to a due diligence process to assess the credit risks implicit in the
transaction. In the case of commercial property lending we protect our
interests by taking security over the underlying property associated with
each investment transaction.
Banking counterparty risk
The group is exposed to potential financial loss
should banks or the issuers of financial instruments
default on their obligations to us. We are also
exposed to counterparty risks in respect of the
providers of settlement and custody services.
Retail, LGRI,
LGC and Group
The group controls its exposures to banking counterparties and the issuers
of financial instruments using a framework of counterparty limits. These limits
take account of the relative financial strength of the counterparty as well as
other bank counterparty exposures that the group may have. Limits are subject
to regular review with actual exposures monitored against limits. The group has
defined criteria for the selection of custody and settlement services. The
financial strength of providers is regularly reviewed.
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Balance sheet management
continued
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Liquidity risk
Principal risks Business segment Controls to mitigate risks
Contingent event risk
Events that result in liquidity risk include a pandemic
that could lead to significantly higher levels of
claims than would normally be expected, or extreme
events impacting the timing of cash flows or the ability
to realise investments at a given value within
a specified timeframe.
Retail and
Group
The group seeks to ensure that it meets its obligations as they fall due and
avoids incurring material losses on forced asset sales in order to meet those
obligations. A limited level of contingent liquidity risk is, however, an accepted
element of writing insurance contracts. It is furthermore a consequence of
the markets in which the group operates and the execution of investment
management strategies. However, the group\u2019s insurance businesses seek
to maintain sufficient liquid assets and standby facilities to meet a prudent
estimate of the cash outflows that may arise from contingent events. The
level of required liquidity is identified using techniques including stress tests
for shock events and the profile of actual liquid assets is regularly compared
to the required liability profile. The group\u2019s treasury function provides formal
facilities to other areas of the group to cover contingent liquidity requirements
arising from more extreme events and where investment assets may not be
readily realisable.
Collateral liquidity risk
Within the annuity businesses, the use of financial
instruments to hedge default, interest rate, currency
and inflation risks can require the posting of collateral
with counterparties at short notice.
Retail and LGRI Liquidity requirements to meet potential collateral calls under stressed
conditions are actively managed and an appropriate pool of eligible assets
is maintained with counterparties as specified in the associated agreements.
As at 31 December 2022, LGRI and Retail held eligible collateral worth more
than five times the total amount of outstanding collateral (using the most
representative definition of collateral contained within the group\u2019s different
collateral agreements).
Investment liquidity risk
Direct lending, sale and leaseback investments
and lifetime mortgage business are inherently
illiquid forms of investment, with limited secondary
markets to realise the value of assets outside
agreed redemption terms. Alternative equity
investments are also inherently illiquid forms
of investment, with limited secondary markets
to realise the value of assets.
Retail, LGRI and
LGC
Given the illiquid nature of the annuity and other liabilities the group is able and
willing to take advantage of the premium offered by illiquid assets. The group,
however, sets limits on the overall exposure to illiquid investments taking
account of the nature and type of liabilities that the assets are held to meet.
As at 31 December 2022, the group had \u00a34,834m (2021: \u00a33,596m) of cash and cash equivalents in shareholder funds and a \u00a31.5bn (2021: \u00a31.0bn)
syndicated committed revolving credit facility in place, provided by a number of its key relationship banks, maturing in August 2027.
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8 Assets analysis
The group has categorised its assets and liabilities in the following disclosure in accordance with the level of shareholder exposure to market and credit
risks. Various reinsurance and hedging arrangements are in place as mechanisms to mitigate the risks.
The two categorisations presented are:
Unit linked
For unit linked contracts, there is a direct link between the investments and the obligations. Unit linked business is written in both Legal and General
Assurance Society Limited and Legal and General Assurance (Pensions Management) Limited. The financial risk on these contracts is borne by the
policyholders. The group is therefore not directly exposed to any market risk, currency risk or credit risk for these contracts. As a result, risk disclosures
have not been presented for unit linked assets and liabilities.
Shareholder
All non-unit linked assets are classified as shareholder assets. Shareholders of the group are directly exposed to market and credit risk on these assets,
including those backing the non-unit linked business.
The table below presents an analysis of the balance sheet by category. The quantitative risk disclosures in Notes 15 and 16 have been provided using
this categorisation.
Unit
Shareholder linked Total
As at 31 December 2022 \u00a3m \u00a3m \u00a3m
Assets
Goodwill and Other intangible assets 512 \u2013 512
Investment in associates and joint ventures accounted for using the equity method 554 \u2013 554
Property, plant and equipment 252 74 326
Investments
1
127, 290 363,341 490,631
Reinsurers\u2019 share of contract liabilities 6,955 \u2013 6,955
Other assets 7,683 6,615 14,298
Total assets 143,246 370,030 513,276
Liabilities
Core borrowings 4,432 (94) 4,338
Operational borrowings 963 256 1,219
Non-participating contract liabilities 71,752 285,415 357,167
Other liabilities 53,989 84,424 138,413
Total liabilities 131,136 370,001 501,137
Unit
Shareholder linked Total
As at 31 December 2021 \u00a3m \u00a3m \u00a3m
Assets
Goodwill and Other intangible assets 433 \u2013 433
Investment in associates and joint ventures accounted for using the equity method 375 \u2013 375
Property, plant and equipment 242 74 316
Investments
1
114,829 450,182 565,011
Reinsurers\u2019 share of contract liabilities 7,180 \u2013 7,180
Other assets 6,701 2,622 9,323
Total assets 129,760 452,878 582,638
Liabilities
Core borrowings 4,309 (53) 4,256
Operational borrowings 924 8 932
Non-participating contract liabilities 91,698 371,081 462,779
Other liabilities 21,916 81,812 103,728
Total liabilities 118,847 452,848 571,695
1. Investments includes financial investments, investment property and cash and cash equivalents.
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9 Other intangible assets Other intangible assets mainly consist of capitalised software costs and intangible assets acquired as part of a business combination (customer relationships and brand). Where software costs are separately identifiable and measurable, they are capitalised at cost and amortised over their expected useful life on a straight line basis. Costs incurred to internally develop software are only capitalised if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the group intends to and has sufficient resources to complete such development and to use or sell the asset. Otherwise, such costs are recognised in profit or loss as incurred. Intangible assets acquired via business combinations are recognised at fair value and are subsequently amortised on a straight line basis over their estimated useful life. The brand balance acquired by the group is deemed to have an indefinite useful life and is therefore not amortised. The estimated amortisation periods for intangible assets with finite useful lives are as follows: \u2022 IT development and software 3-10 years \u2022 Customer relationship 3 years Amortisation methods, useful lives and any expected residual values are reviewed at each reporting date and adjusted if appropriate. The amortisation charge for the year is recognised in the Consolidated Income Statement in Other expenses (see Note 3). For impairment testing, other intangible assets are tested either individually or at the cash-generating unit level. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets with finite useful lives are tested when there are indications of impairment. The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and its value in use. Any impairments are recognised in Other expenses (see Note 3) . Capitalised software costs 1 Other 2 Total 2022 2022 2022 \u00a3m \u00a3m \u00a3m Cost As at 1 January 450 34 484 Additions 120 1 121 Disposals (34) \u2013 (34) Increase due to currency translation 5 \u2013 5 Other movements 3 (21) \u2013 (21) As at 31 December 520 35 555 Accumulated amortisation and impairment As at 1 January (115) (4) (119) Amortisation for the year (45) (1) (46) Impairment \u2013 \u2013 \u2013 Disposals 28 \u2013 28 Other movements 3 23 \u2013 23 As at 31 December (109) (5) (114) Total net book value as at 31 December 411 30 441 To be amortised within 12 months 43 To be amortised after 12 months 398 1. Total capitalised software costs include \u00a3204m of work in progress assets that are not yet available for use as at 31 December 2022. 2. Other intangible assets include brand (\u00a324m) and product design costs (\u00a36m) as at 31 December 2022. 3. Other movements primarily reflect the removal of fully amortised assets that are no longer in use. Legal & General Group Plc\u2002Annual Report and Accounts 2022 177 Strategic report Governance Financial statements Other information Balance sheet management 13.2_Financial_statements_v3.indd 17713.2_Financial_statements_v3.indd 177 14/03/2023 20:2114/03/2023 20:21
9 Other intangible assets continued
Capitalised
software
costs
1
Other
2
Total
2021 2021 2021
\u00a3m \u00a3m \u00a3m
Cost
As at 1 January 372 33 405
Additions 120 1 121
Increase due to currency translation 1 \u2013 1
Other movements
3
(43) \u2013 (43)
As at 31 December 450 34 484
Accumulated amortisation and impairment
As at 1 January (73) (3) (76)
Amortisation for the year (39) (1) (40)
Impairment (49) \u2013 (49)
Other movements
3
46 \u2013 46
As at 31 December (115) (4) (119)
Total net book value as at 31 December 335 30 365
To be amortised within 12 months 60
To be amortised after 12 months 305
1. Total capitalised software costs include \u00a3152m of work in progress assets that were not yet available for use as at 31 December 2021.
2. Other intangible assets include brand (\u00a324m) and product design costs (\u00a36m) as at 31 December 2021.
3. Other movements primarily reflect the removal of fully amortised assets that were no longer in use.
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10 Financial investments and investment property
The group holds financial investments and investment property to back insurance contracts on behalf of policyholders and as group capital.
The group classifies its financial investments on initial recognition as held for trading (HFT), designated at fair value through profit or loss (FVTPL),
available-for-sale (AFS) or loans and receivables. Initial recognition of financial investments is on the trade date.
In general, the group\u2019s policy is to measure investments at FVTPL. Financial investments held by the group are designated as FVTPL as their
performance is evaluated on a total return basis, consistent with asset performance reporting to the Group Financial Risk Committee and the
group\u2019s investment strategy. Assets designated as FVTPL include debt securities (including lifetime and retirement interest only mortgages),
equity instruments which would otherwise have been classified as AFS, and reverse repurchase agreements within loans which would otherwise
be designated at amortised cost. Assets backing non-participating policyholder liabilities are designated as FVTPL. The group\u2019s non-participating
investment contract liabilities are measured on the basis of current information and are designated as FVTPL.
All derivatives other than those designated as hedges are classified as HFT. Financial investments classified as HFT and designated at FVTPL
are measured at fair value with gains and losses reflected in the Consolidated Income Statement. Transaction costs are expensed as incurred.
Certain other financial investments classified as AFS are measured at fair value with unrealised gains and losses recognised in a separate
reserve within equity. Realised gains and losses, impairment losses, dividends, interest and foreign exchange movements on non-equity
instruments are recognised in the Consolidated Income Statement. Directly attributable transaction costs are included in the initial measurement
of the investment.
Financial investments classified as loans are either designated at FVTPL, or initially measured at fair value plus transaction costs, and
subsequently measured at amortised cost using the effective interest method. The designated at FVTPL classification currently only applies
to reverse repurchase agreements.
Financial investments are recognised when the group becomes a party to the contractual provisions of the instrument. Financial investments are
derecognised only when the contractual rights to the cash flows from the investment expire, or when the group transfers substantially all the risks
and rewards of ownership to another entity.
Financial assets, other than those measured at FVTPL, are assessed for impairment at each balance sheet date. They are impaired where there
is objective evidence that, as a result of one or more events after initial recognition of the financial asset, the estimated future cash flows have
been affected.
Investment property is comprised of land and buildings which are held for long-term rental yields and capital growth, as well as right-of-use assets
of the same nature. It is carried at fair value, with changes in fair value recognised in the Consolidated Income Statement within investment return.
Investment property in the UK is valued at least bi-annually by external chartered surveyors at open market values in accordance with the
\u2018Appraisal and Valuation Manual\u2019 of The Royal Institution of Chartered Surveyors or using internal valuations and estimates during the intervening
period. Outside the UK, valuations are produced in conjunction with external qualified professional valuers in the countries concerned. In the event
of a material change in market conditions between the valuation date and balance sheet date, an internal valuation is performed and adjustments
made to reflect any material changes in fair value.
Right-of-use investment property assets relate to long-leasehold interests in land held solely for the purposes of the related investment property asset.
The group applies the fair value model to these interests as they meet the definition of investment property under IAS 40, \u2018Investment Property\u2019.
The group receives and pledges collateral in the form of cash or non-cash assets in respect of various transactions, in order to reduce the credit
risk of these transactions. The amount and type of collateral required where the group receives collateral depends on an assessment of the credit
risk of the counterparty.
Collateral received in the form of cash, where the group has contractual rights to receive the cash flows generated, is recognised as an asset in the
Consolidated Balance Sheet with a corresponding liability for its repayment. Non-cash collateral received is not recognised in the Consolidated
Balance Sheet unless the counterparty defaults on its obligations under the relevant agreement.
Non-cash collateral pledged where the group retains the contractual rights to receive the cash flows generated is not derecognised from the
Consolidated Balance Sheet, unless the group defaults on its obligations under the relevant agreement.
Cash collateral pledged, where the counterparty has contractual rights to receive the cash flows generated, is derecognised from the Consolidated
Balance Sheet and a corresponding receivable is recognised for its return.
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10 Financial investments and investment property continued
Unit
Shareholder linked Total
2022 2022 2022
Note \u00a3m \u00a3m \u00a3m
Financial investments at fair value classified as:
Fair value through profit or loss 72,945 312,003 384,948
Available-for-sale 789 \u2013 789
Held for trading 41,978 3,449 45,427
Loans at fair value 10(ii) 1,072 13,211 14,283
Financial investments at fair value 116,784 328,663 445,447
Loans at amortised cost 10(ii) 28 \u2013 28
Total financial investments 116,812 328,663 445,475
Investment property 5,644 3,728 9,372
Total financial investments and investment property 122,456 332,391 454,847
Expected to be recovered within 12 months 41,466
Expected to be recovered after 12 months 413,381
Unit
Shareholder linked Total
2021 2021 2021
Note \u00a3m \u00a3m \u00a3m
Financial investments at fair value classified as:
Fair value through profit or loss 89,323 419,991 509,314
Available-for-sale 665 \u2013 665
Held for trading 13,203 3,589 16,792
Loans at fair value 10(ii) 2,240 9,271 11,511
Financial investments at fair value 105,431 432,851 538,282
Loans at amortised cost 10(ii) 92 \u2013 92
Total financial investments 105,523 432,851 538,374
Investment property 5,710 4,440 10,150
Total financial investments and investment property 111,233 4 37,291 548,524
Expected to be recovered within 12 months 48,766
Expected to be recovered after 12 months 499,758
Investment risks on unit linked assets are borne by the policyholders. The remaining risks associated with financial investments are outlined in Note 7.
Financial investments, cash and cash equivalents include:
\u2022 \u00a37,161m (2021: \u00a33,826m) of assets pledged as collateral against net derivative liability counterparty positions. The assets used as collateral are
Treasury Gilts, Foreign Government Bonds, AAA and AA Corporate Bonds and Cash (2021: Treasury Gilts, Foreign Government Bonds, AAA and AA
Corporate Bonds and Cash) having a residual maturity of over 38 years (2021: over 34 years).
\u2022 \u00a35,617m (2021: \u00a37,586m) of assets pledged as collateral in relation to various pension risk transfer deals. The assets used as collateral are Treasury
Gilts, AAA to BBB Corporate Bonds and Cash (2021: Treasury Gilts, AAA to BBB Corporate Bonds and Cash) having a residual maturity of over 88
years (2021: over 89 years).
\u2022 \u00a3673m (2021: \u00a3900m) of assets pledged in respect of longevity swaps with reinsurance counterparties. The assets used as collateral are Treasury Gilts
and AAA to AA Corporate Bonds (2021: Treasury Gilts, AAA to A Corporate Bonds) having a residual maturity of over 45 years (2021: over 47 years).
While pledged as collateral, the group is entitled to receive all of the cash flows from the assets above, and there is no obligation to pay or transfer cash
flows arising from them to another entity. These assets are neither past due, nor impaired. The carrying value reflects the full exposure of these assets.
The group is permitted to sell or repledge collateral as per the International Swap Dealers Association agreements in place, including where there
has been no default by the owner of the collateral. As at 31 December 2022, the group had repledged cash collateral with a fair value of \u00a3980m
(2021: \u00a3227m) in order to fulfil other collateral requirements in relation to derivatives contracts. The counterparties have an obligation to return
the cash collateral to the group. There are no other significant terms and conditions associated with the use of this cash collateral.
Financial investments include \u00a331,533m (2021: \u00a346,331m) of assets that have been sold but not derecognised and are subject to repurchase
agreements. Risks and rewards of these assets have been retained within the group. The related obligation to repurchase the financial assets
is included within Payables and other financial liabilities (Note 24).
Financial investments have been allocated between those expected to be settled within 12 months and after 12 months in line with the expected settlement
of the backed liabilities. Assets in excess of the insurance and investment contract liabilities have been classified as expected to be settled after 12 months.
Legal & General Group Plc\u2002Annual Report and Accounts 2022180 Financial statements
Balance sheet management
continued
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(i) Financial investments at fair value
Unit
Shareholder linked Total
2022 2022 2022
Notes \u00a3m \u00a3m \u00a3m
Equity securities 3,071 164,264 167, 335
Debt securities 70,663 147,739 218,402
Derivative assets 12 41,978 3,449 45,427
Loans at fair value 10(ii) 1,072 13,211 14,283
Total financial investments at fair value 116,784 328,663 445,447
Unit
Shareholder linked Total
2021 2021 2021
Notes \u00a3m \u00a3m \u00a3m
Equity securities 3,185 209,864 213,049
Debt securities 86,803 210,127 296,930
Derivative assets 12 13,203 3,589 16,792
Loans at fair value 10(ii) 2,240 9,271 11,511
Total financial investments at fair value 105,431 432,851 538,282
Included within unit linked equity securities are \u00a3187m (2021: \u00a3237m) of debt instruments which incorporate an embedded derivative linked to the value
of the group\u2019s share price.
(ii) Loans
Unit
Shareholder linked Total
2022 2022 2022
\u00a3m \u00a3m \u00a3m
Loans at amortised cost
Policy loans 27 \u2013 27
Other loans and receivables 1 \u2013 1
28 \u2013 28
Loans at fair value
Reverse repurchase agreements 1,072 13,211 14,283
Total loans 1,100 13,211 14,311
Unit
Shareholder linked Total
2021 2021 2021
\u00a3m \u00a3m \u00a3m
Loans at amortised cost
Policy loans 30 \u2013 30
Other loans and receivables 62 \u2013 62
92 \u2013 92
Loans at fair value
Reverse repurchase agreements 2,240 9,271 11,511
Total loans 2,332 9,271 11,603
There are no material differences between the carrying values reflected above and the fair values of these loans.
(iii) Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources,
while unobservable inputs reflect the group\u2019s view of market assumptions in the absence of observable market information. The group utilises
techniques that maximise the use of observable inputs and minimise the use of unobservable inputs.
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10 Financial investments and investment property continued
(iii) Fair value hierarchy continued
The levels of fair value measurement bases are defined as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on
observable market data (unobservable inputs).
All of the group\u2019s Level 2 assets have been valued using standard market pricing sources, such as IHS Markit, ICE and Bloomberg, or Index Providers
such as Barclays, Merrill Lynch or JPMorgan. Each uses mathematical modelling and multiple source validation in order to determine consensus prices,
with the exception of OTC Derivative holdings; OTCs are marked to market using an in-house system (Lombard Oberon), external vendor (IHS Markit),
internal model or Counterparty Broker marks. In normal market conditions, we would consider these market prices to be observable market prices.
Following consultation with our pricing providers and a number of their contributing brokers, we have considered that these prices are not from a suitably
active market and have therefore classified them as Level 2.
The group\u2019s investment properties are valued by appropriately qualified external valuers using unobservable inputs, resulting in all investment property
being classified as Level 3.
The group\u2019s policy is to re-assess categorisation of financial assets at the end of each reporting period and to recognise transfers between levels at that
point in time. During 2020 the group enhanced the level of market data it uses to support the determination of the observability of valuation inputs, and
this has increased the sensitivity of the levelling assessment to trading volumes, which in turn has increased the number of debt securities transferring
between Level 1 and Level 2. At 31 December 2022 debt securities totalling net \u00a36.0bn (2021: \u00a35.2bn) transferred from Level 2 to Level 1 in the fair
value hierarchy.
Total Level 1 Level 2 Level 3
For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
Shareholder
Equity securities 3,071 1,236 41 1,794
Debt securities 70,663 17,239 31,339 22,085
Derivative assets 41,978 106 41,872 \u2013
Loans at fair value
1
1,072 \u2013 1,072 \u2013
Investment property 5,644 \u2013 \u2013 5,644
Total Shareholder 122,428 18,581 74,324 29,523
Unit linked
Equity securities 164,264 163,727 24 513
Debt securities 147,739 105,955 40,757 1,027
Derivative assets 3,449 164 3,285 \u2013
Loans at fair value 13, 211 \u2013 13,211 \u2013
Investment property 3,728 \u2013 \u2013 3,728
Total Unit linked 332,391 269,846 57,277 5,268
Total financial investments and investment property at fair value
1
454,819 288,427 131,601 34,791
Total Level 1 Level 2 Level 3
For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m
Shareholder
Equity securities 3,185 1,854 63 1,268
Debt securities 86,803 32,593 29,887 24,323
Derivative assets 13,203 9 13,194 \u2013
Loans at fair value
1
2,240 \u2013 2,240 \u2013
Investment property 5,710 \u2013 \u2013 5,710
Total Shareholder 111,141 34,456 45,384 31,301
Unit linked
Equity securities 209,864 209,119 25 720
Debt securities 210,127 170,838 38,726 563
Derivative assets 3,589 90 3,499 \u2013
Loans at fair value 9,271 \u2013 9,271 \u2013
Investment property 4,440 \u2013 \u2013 4,440
Total Unit linked 4 37, 291 380,047 51,521 5,723
Total financial investments and investment property at fair value
1
548,432 414,503 96,905 37,024
1. Excludes loans (including accrued interest) of \u00a328m (2021: \u00a392m), which are held at amortised cost.
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continued
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(a) Level 3 assets measured at fair value
Level 3 assets, where modelling techniques are used, are comprised of property, unquoted securities, untraded debt securities and securities where
unquoted prices are provided by a single broker. Unquoted securities include suspended securities, investments in private equity and property vehicles.
Untraded debt securities include private placements, commercial real estate loans, income strips, retirement interest only and other lifetime mortgages.
In many situations, inputs used to measure the fair value of an asset or liability may fall into different levels of the fair value hierarchy. In these situations,
the group determines the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value. As a
result, both observable and unobservable inputs may be used in the determination of fair values that the group has classified within Level 3.
The group determines the fair values of certain financial assets and liabilities based on quoted market prices, where available. The group also determines
fair value based on estimated future cash flows discounted at the appropriate current market rate. As appropriate, fair values reflect adjustments for
counterparty credit quality, the group\u2019s credit standing, liquidity and risk margins on unobservable inputs.
Fair values are subject to a control framework designed to ensure that input variables and outputs are assessed independent of the risk taker. These
inputs and outputs are reviewed and approved by a valuation committee and validated independently as appropriate.
Other Other
Equity financial Investment Equity financial Investment
securities investments property Total securities investments property Total
2022 2022 2022 2022 2021 2021 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
As at 1 January 1,988 24,886 10,150 37,024 1,801 21,957 8,475 32,233
Total gains/(losses) for the year
\u2013 in other comprehensive income \u2013 2 \u2013 2 \u2013 (3) \u2013 (3)
\u2013 realised gains/(losses)
1
28 (9) 81 100 31 12 (4) 39
\u2013 unrealised gains/(losses)
1
83 (6,149) (1,796) (7,862) 208 (87) 1,028 1,149
Purchases/Additions 504 11,689 1,307 13,500 130 5,429 985 6,544
Sales/Disposals (381) (7,708) (377) (8,466) (153) (2,351) (334) (2,838)
Transfers into Level 3 84 72 \u2013 156 2 10 \u2013 12
Transfers out of Level 3 (41) \u2013 \u2013 (41) (31) (112) \u2013 (143)
Foreign exchange rate movements 42 329 7 378 \u2013 31 \u2013 31
As at 31 December 2,307 23,112 9,372 34,791 1,988 24,886 10,150 37,024
1. Realised and unrealised gains/(losses) are recognised in Investment return in the Consolidated Income Statement.
Equity securities
Level 3 equity securities amount to \u00a32,307m (2021: \u00a31,988m), of which the majority is made up of holdings in investment property vehicles and private
investment funds. They are valued at the proportion of the group\u2019s holding of the Net Asset Value reported by the investment vehicles. Other equity
securities are valued by a number of third party specialists using a range of techniques which are often dependent on the maturity of the underlying
investment but can also depend on the characteristics of individual assets. Such techniques include transaction values underpinned by analysis of
milestone achievement and cash runway for early/start-up stage investments, discounted cash flow models for investments at the next stage of
development and earnings multiples for more mature investments.
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10 Financial investments and investment property continued
(iii) Fair value hierarchy continued
(a) Level 3 assets measured at fair value continued
Other financial investments
Lifetime mortgage (LTM) loans and retirement interest only mortgages amount to \u00a34,844m (2021: \u00a36,857m). Lifetime mortgages are valued using a
discounted cash flow model by projecting best-estimate net asset proceeds and discounted using rates inferred from current LTM loan pricing. The
inferred illiquidity premiums for the majority of the portfolio range between 100 and 250bps. This ensures the value of loans at outset is consistent with
the purchase price of the loan and achieves consistency between new and in-force loans. Lifetime mortgages include a no negative equity guarantee
(NNEG) to borrowers. This ensures that if there is a shortfall between the sale proceeds of the property and the outstanding loan balance on redemption
of the loan, the value of the loan will be reduced by this amount. The NNEG on loan redemption is valued as a series of put options, which we calculate
using a variant of the Black-Scholes formula. Key assumptions in the valuation of lifetime mortgages include short-term and long-term property growth
rates, property index volatility, voluntary early repayments and longevity assumptions. The valuation as at 31 December 2022 reflects a combination of
short-term and long-term property growth rate assumptions equivalent to a flat rate of 2.6% annually, after allowing for the effects of dilapidation. The
values of the properties collateralizing the LTM loans are updated from the date of the last property valuation to the valuation date by indexing using UK
regional house price indices.
Private credit loans (including commercial real estate loans) amount to \u00a313,461m (2021: \u00a313,521m). Their valuation is determined by discounted future
cash flows which are based on the yield curve of the LGIM approved comparable bonds and the initial spread, both of which are agreed by IHS Markit
who also provide an independent valuation of comparable bonds. Unobservable inputs that go into the determination of comparators include rating,
sector, sub-sector, performance dynamics, financing structure and duration of investment. Existing private credit investments, which were executed
as far back as 2011, are subject to a range of interest rate formats, although the majority are fixed rate. The weighted average duration of the portfolio
is 7.8 years, with a weighted average life of 10.2 years. Maturities in the portfolio currently extend out to 2064. The private credit portfolio of assets has
internal ratings assigned by an independent credit team in line with internally developed methodologies. These credit ratings range from AAA to BB-.
Private placements held by the US business amount to \u00a32,310m (2021: \u00a31,762m). They are valued using a pricing matrix comprised of a public spread
matrix, internal ratings assigned to each holding, average life of each holding, and a premium spread matrix. These are added to the risk-free rate to
calculate the discounted cash flows and establish a market value for each investment grade private placement. The valuation as at 31 December 2022
reflects illiquidity premiums between 20 and 70bps.
Income strip assets amount to \u00a31,414m (2021: \u00a31,626m). Their valuation is outsourced to Knight Frank and CBRE who apply a yield to maturity to
discounted future cash flows to derive valuations. The overall valuation takes into account the property location, tenant details, tenure, rent, rental break
terms, lease expiries and underlying residual value of the property. The valuation as at 31 December 2022 reflects equivalent yield ranges between
3% and 8% and estimated rental values (ERV) between \u00a35 and \u00a3310 per sq.ft.
Commercial mortgage loans amount to \u00a31,000m (2021: \u00a31,021m) and are determined by incorporating credit risk for performing loans at the portfolio
level and adjusted for loans identified to be distressed at the loan level. The projected cash flows of each loan are discounted along stochastic risk-free
rate paths and are inclusive of an Option Adjusted Spread (OAS), derived from current internal pricing on new loans, along with the best observable
inputs. The valuation as at 31 December 2022 reflects illiquidity premiums between 20 and 30bps.
Other debt securities which are not traded in an active market amount to \u00a383m (2021: \u00a399m). They have been valued using third party or counterparty
valuations, and these prices are considered to be unobservable due to infrequent market transactions.
Investment property
Level 3 investment property amounting to \u00a39,372m (2021: \u00a310,150m) is valued with the involvement of external valuers. All property valuations are
carried out in accordance with the latest edition of the Valuation Standards published by the Royal Institute of Chartered Surveyors, and are undertaken
by appropriately qualified valuers as defined therein. Whilst transaction evidence underpins the valuation process, the definition of market value,
including the commentary, in practice requires the valuer to reflect the realities of the current market. In this context valuers must use their market
knowledge and professional judgement and not rely only upon market sentiment based on historic transactional comparables.
The valuation of investment properties also includes an income approach that is based on current rental income plus anticipated uplifts, where the
uplift and discount rates are derived from rates implied by recent market transactions. These inputs are deemed unobservable. The valuation as at
31 December 2022 reflects equivalent yield ranges between 2% and 20% and ERV between \u00a31 and \u00a3357 per sq.ft.
Legal & General Group Plc\u2002Annual Report and Accounts 2022184 Financial statements
Balance sheet management
continued
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The table below shows the valuation of investment property by sector:
2022 2021
\u00a3m \u00a3m
Retail 780 1,025
Leisure 461 482
Distribution 1,104 1,552
Office space 4,069 4,223
Industrial and other commercial 1,624 1,767
Accommodation 1,334 1,101
Total 9,372 10,150
(b) Effect of changes in assumptions on Level 3 assets
Fair values of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are not
evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data.
Where material, the group assesses the sensitivity of fair values of Level 3 investments to changes in unobservable inputs to reasonable alternative
assumptions. The table below shows the impact of applying these sensitivities to the fair value of Level 3 assets as at 31 December 2022. Further
disclosure on how these sensitivities have been applied can be found in the descriptions following the table.
Sensitivities
Fair value
2022
\u00a3m
Positive
impact 2022
\u00a3m
Negative
impact 2022
\u00a3m
Lifetime mortgages 4,844 189 (189)
Private credit portfolios 16,771 911 (911)
Investment property 9,372 812 (859)
Other investments
1
3,804 514 (289)
Total Level 3 assets 34,791 2,426 (2,248)
1. Other investments include Level 3 equity securities, income strip assets and other traded debt securities which are Level 3.
The sensitivities are not a function of sensitising a single variable relating to the valuation of the asset, but rather a function of flexing multiple factors
often at individual asset level. The following sets out a number of key factors by asset type, and how they have been flexed to derive reasonable
alternative valuations.
Lifetime mortgages
Key assumptions used in the valuation of lifetime mortgage assets are listed in Note 10(iii)(a) and sensitivities are applied to each assumption which are
used to derive the values in the above table. The most significant reduction in value is -10% instant reduction in property valuation across the portfolio
which, applied in isolation produces a sensitised value of \u00a3(75)m. The most significant increase in value is -10bps to the discount rate which, applied in
isolation produces a sensitised value of \u00a365m.
Private credit portfolios
The sensitivity in the private credit portfolio has been determined through a method which estimates investment spread value premium differences as
compared to the institutional investment market. Individual investment characteristics of each holding, such as credit rating and duration are used to
determine spread differentials for the purposes of determining alternate values. Spread differentials are determined to be lower for highly rated and/or
shorter duration assets as compared to lower rated and/or longer duration assets. A significant component of the spread differential is in relation to the
selection of comparator bonds, which is the potential difference in spread of the basket of relevant comparators determined by respective investors. If
we were to take an AA rated asset it may attract a spread differential of 15bps on the selection of comparator bonds as opposed to 40bps for a similar
duration BBB rated asset. Applied in isolation the sensitivity used to reflect the spread in comparator bond selection results in sensitised values of
\u00a3313m and \u00a3(313)m.
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10 Financial investments and investment property continued
(iii) Fair value hierarchy continued
(b) Effect of changes in assumptions on Level 3 assets continued
Investment property
Investment property holdings are valued by independent valuers on the basis of open market value as defined in the appraisal and valuation manual of
the Royal Institute of Chartered Surveyors (RICS). As such, sensitivities are calculated through a mixture of asset level and portfolio level methodologies
which make reference to individual investment characteristics of the holding but do not flex individual assumptions used by the independent expert in
valuing the holdings. Each method is applied individually and aggregated with equal weighting to determine the overall sensitivity determined for the
portfolio. One method is similar to that used in the private credit portfolio as it determines the impact of an alternate property yield determined in
reference to credit ratings, remaining term and other characteristics of each holding. In this methodology we would apply a lower yield sensitivity to a
highly rated and/or shorter remaining term asset compared with a lower rated and/or longer remaining term asset. If we were to take an AA rated asset
with remaining term of 25 years in normal market conditions this would lead to a 15bps yield flex (as opposed to a 35bps yield flex for a BBB rated asset
with 30 year remaining term). The methodology which leads to the most significant sensitivity at the balance sheet date is related to an example in case
law where it was found that an acceptable margin of error in a valuation dispute is 10% either way, subject to the valuation being undertaken with due
care. If this sensitivity were to be taken without a weighting it would produce sensitised values of \u00a3603m and \u00a3(603)m.
It should be noted that some sensitivities described above are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from
these results.
(iv) Interest rate benchmark reform
In the UK, GBP LIBOR was replaced by SONIA from the end of 2021, and USD LIBOR is expected to be replaced by mid-2023. Euribor will remain but will
be administered by the Euro Money Markets Institute (EMMI).
The group transitioned away from GBP LIBOR by 31 December 2021, with only a few remaining cross currency positions which matured and rolled off in
March 2022. As at 31 December 2022, a residual amount of floating-rate notes remains which reference a \u2018synthetic\u2019 LIBOR, as permitted.
At the start of the transition project, the group\u2019s holding of USD LIBOR was significantly smaller than GBP LIBOR. Aligned with the different currency
transition dates, trading out of USD LIBOR has been more gradual and the group holds interest rate swaps and floating-rate notes which still reference
the index. It is expected that these will be replaced by USD SOFR before the 23 June 2023 transition date.
The following table contains details of all the financial instruments currently subject to the IBOR reform that the group holds on its balance sheet at 31
December 2022 which have not yet transitioned to an alternative interest rate benchmark. The amounts of non-derivative financial assets are shown at
their carrying amounts and derivatives are shown at their notional amounts.
GBP LIBOR USD LIBOR Total GBP LIBOR USD LIBOR Total
2022 2022 2022 2021 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Non-derivative financial assets
Debt securities 64 110 174 229 55 284
Derivatives \u2013 32,460 32,460 743 59,356 60,099
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Balance sheet management
continued
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11 IFRS 9 \u2018Financial Instruments\u2019 deferral
As required by the amendments to IFRS 4 \u2018Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts\u2019, the
disclosures below are presented in order to provide users of the financial statements with information which allows them to compare financial
assets when IFRS 9 is not applied with those of entities applying IFRS 9. All entities within the group whose activities are not primarily insurance
related and which prepare financial statements on an IFRS basis (including UK entities qualifying for disclosure exemptions under FRS 101,
\u2018Reduced Disclosure Framework\u2019) implemented IFRS 9 in 2018. The financial statements of these entities made available through Companies
House.
(i) Fair value of financial assets with contractual terms that give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding (passing the SPPI test):
Financial
assets
passing the
SPPI test
1,2
All other
financial
assets
3
Financial
assets
passing the
SPPI test
1,2
All other
financial
assets
3
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Equity securities \u2013 167, 335 \u2013 213,049
Debt securities 1,729 216,673 2,296 294,634
Derivative assets \u2013 45,427 \u2013 16,792
Loans at fair value \u2013 14,283 \u2013 11,511
Total financial investments at fair value 1,729 443,718 2,296 535,986
Loans at amortised cost 28 \u2013 92 \u2013
Reinsurance receivables 291 \u2013 84 \u2013
Insurance and intermediaries receivables 36 40 60 9
Other financial assets 9,173 236 5,171 \u2013
Total fair value of financial assets
4
11, 257 443,994 7,703 535,995
1. Financial assets classified as held for trading or that are managed and whose performance is evaluated on a fair value basis do not require an SPPI test to be performed. These assets are
reported in All other financial assets.
2. For financial assets which pass the SPPI test held at 31 December 2022 there was a change in fair value during the year of \u00a3(237)m (2021: \u00a3(64)m).
3. For all other financial assets held at 31 December 2022 there was a change in fair value during the year of \u00a3(107,453)m (2021: \u00a325,093m).
4. Financial assets exclude cash and cash equivalents and receivables under finance leases.
(ii) Credit risk information of financial assets passing the SPPI test:
AAA AA A BBB BB or below
1
Other
2
Total
2022 2022 2022 2022 2022 2022 2022
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Total financial investments at fair value 204 158 232 1,086 24 25 1,729
Loans at amortised cost \u2013 \u2013 \u2013 \u2013 \u2013 28 28
Reinsurance receivables \u2013 207 \u2013 \u2013 \u2013 84 291
Insurance and intermediaries receivables \u2013 \u2013 \u2013 \u2013 \u2013 36 36
Other financial assets 4 72 10 10 \u2013 9,077 9,173
Total carrying value of financial assets passing the SPPI test
3
208 437 242 1,096 24 9,250 11, 257
AAA AA A BBB BB or below
1
Other
2
Total
2021 2021 2021 2021 2021 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Total financial investments at fair value 327 257 485 1,180 47 \u2013 2,296
Loans at amortised cost \u2013 \u2013 1 \u2013 \u2013 91 92
Reinsurance receivables \u2013 \u2013 \u2013 \u2013 \u2013 84 84
Insurance and intermediaries receivables \u2013 \u2013 \u2013 \u2013 \u2013 60 60
Other financial assets \u2013 1 91 9 2 5,068 5,171
Total carrying value of financial assets passing the SPPI test
3
327 258 577 1,189 49 5,303 7,70 3
1. Financial assets classified as \u2018BB or below\u2019 are considered to be lower than investment grade, and therefore are not deemed to have low credit risk under IFRS 9.
2. Other financial assets are made up of unrated and short-term receivables for which a formal credit rating is not assigned. The fair value of financial assets passing the SPPI test that are not
deemed to have low credit risk as at 31 December 2022 is \u00a342m (31 December 2021: \u00a381m).
3. Financial assets exclude cash and cash equivalents and receivables under finance leases. The fair value of these assets approximates to their carrying value.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 187
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12 Derivative assets and liabilities
The group uses derivatives as a component of efficient portfolio management. This includes, but is not limited to, hedging economic exposure to
foreign currencies, interest rates, inflation and credit risks. The group uses hedge accounting, provided the prescribed criteria in IAS 39, \u2018Financial
instruments: Recognition and measurement\u2019 are met, to recognise the offsetting effects of changes in the fair value or cash flow of the derivative
instrument and the hedged item. The principal uses of hedge accounting are to:
(i) Defer in equity the changes in the fair value of derivatives designated as the hedge of a future cash flow attributable to a recognised asset
or liability, a highly probable forecast transaction, or a firm commitment until the period in which the future transaction affects profit or loss
or is no longer expected to occur;
(ii) Hedge the exposure to fair value movements of a recognised asset or liability or an unrecognised firm commitment, or a component of any
such item, that is attributable to a particular risk and could affect the Consolidated Income Statement; and
(iii) Hedge the exposure to the currency risk associated with a net investment in a foreign operation.
The relationship between the hedging instrument and the hedged item, together with the risk management objective and strategy for undertaking
the hedge transaction, are documented at the inception of the transaction. The effectiveness of the hedge is documented and monitored on an
ongoing basis. Hedge accounting is only applied for highly effective hedges (between 80% and 125% effectiveness) with any ineffective portion
of the gain or loss recognised in the Consolidated Income Statement in the current year.
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments which do not qualify
for hedge accounting are recognised immediately in the Consolidated Income Statement.
Where the risks and characteristics of derivatives embedded in other contracts are not closely related to those of the host contract and the whole
contract is not carried at fair value, the derivative is separated from that host contract and measured at fair value, with fair value movements
reflected within investment return, unless the embedded derivative itself meets the definition of an insurance contract.
Cash inflows and outflows are presented on a net basis where the group is required to settle net or has a legally enforceable right of offset and
the intention is to settle on a net basis.
Forward foreign exchange contracts \u2013 net investment hedges
The group hedges part of the foreign exchange translation exposure on its net investment in certain overseas subsidiaries, using forward foreign
exchange contracts. It recognises the portion of the gain or loss which is determined in the Consolidated Statement of Comprehensive Income, along
with the gain or loss on translation of the foreign subsidiaries, and in a separate reserve within equity. Gains and losses accumulated in equity are
included in the Consolidated Income Statement on disposal of the relevant hedged item.
Other derivative contracts \u2013 held for trading
The group uses certain derivative contracts which are effective hedges of economic exposures in accordance with the group\u2019s risk management policy,
but for various reasons are not designated within a formal hedge accounting relationship. Therefore, these contracts must be designated as held for
trading, and gains and losses on these contracts are recognised immediately in the Consolidated Income Statement.
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Balance sheet management
continued
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Fair values Fair values
Assets
1
Liabilities
2
Assets
1
Liabilities
2, 3
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Shareholder derivatives:
Interest rate contracts \u2013 held for trading 35,630 37,684 9,809 10,158
Interest rate contracts \u2013 cash flow hedges \u2013 \u2013 \u2013 105
Forward foreign exchange contracts \u2013 held for trading 49 44 34 15
Currency swap contracts \u2013 held for trading 1,103 3,004 463 627
Currency swap contracts \u2013 cash flow hedges 115 \u2013 \u2013 44
Inflation swap contracts \u2013 held for trading 4,964 5,092 2,861 2,778
Credit derivatives \u2013 held for trading \u2013 3 \u2013 23
Equity/index derivatives \u2013 held for trading 6 8 \u2013 \u2013
Other derivatives \u2013 held for trading 111 270 36 347
Total shareholder derivatives 41,978 46,105 13,203 14,097
Unit linked derivatives:
Interest rate contracts \u2013 held for trading 48 255 584 732
Forward foreign exchange contracts \u2013 held for trading 798 1,344 1,851 570
Credit derivatives \u2013 held for trading 6 12 16 34
Inflation swap contracts \u2013 held for trading 2,423 3,271 955 156
Inflation rate contracts \u2013 held for trading \u2013 \u2013 1 \u2013
Equity/index derivatives \u2013 held for trading 144 174 70 75
Other derivatives \u2013 held for trading 30 29 112 54
Total unit linked derivatives 3,449 5,085 3,589 1,621
Total derivative assets and liabilities 45,427 51,190 16,792 15,718
1. Derivative assets are reported in the Consolidated Balance Sheet within Financial investments and investments property (Note 10).
2. Derivative liabilities are reported in the Consolidated Balance Sheet within Payables and other financial liabilities (Note 24).
3. For 2021, the amounts have been updated to reflect the correct analysis of swap contracts across the categories within Shareholder derivatives. There is no impact in respect of the total
Payables and other financial liabilities reflected on the group\u2019s Consolidated Balance Sheet as at 31 December 2021.
The group has entered into fixed rate borrowings denominated in USD and is therefore exposed to foreign exchange and interest rate risks. In order to
hedge these risks the group has entered into cross currency interest rate swaps, enabling the exposure to be swapped into a fixed rate in its functional
currency. These had an asset fair value totaling \u00a3115m (2021: \u00a344m liability fair value) and a notional amount of \u00a31,099m (2021: \u00a31,099m) at 31
December 2022. There was no ineffectiveness recognised in the income statement in respect of these hedges during 2022.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 189
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12 Derivative assets and liabilities continued
The contractual undiscounted cash flows in relation to non-unit linked derivatives have the following maturity profile. Unit linked derivatives have
not been included as shareholders are not directly exposed to liquidity risks.
Maturity profile of undiscounted cash flows
Fair Within Over
values 1 year 1-5 years 5-15 years 15-25 years 25 years Total
As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cash inflows
Shareholder derivatives
Derivative assets 41,978 13,014 32,933 40,608 17,202 10,783 114,540
Derivative liabilities (46,105) 12,562 19,268 28,167 12,032 6,986 79,015
Total (4,127) 25,576 52,201 68,775 29,234 17,769 193,555
Cash outflows
Shareholder derivatives
Derivative assets 41,978 (9,050) (19,698) (25,866) (11,688) (8,073) (74,375)
Derivative liabilities (46,105) (17,5 32) (35,466) (46,948) (18,626) (10,095) (128,667)
Total (4,127) (26,582) (55,164) (72,814) (30,314) (18,168) (203,042)
Net cash flows (1,006) (2,963) (4,039) (1,080) (399) (9,487)
Maturity profile of undiscounted cash flows
Fair Within Over
values 1 year 1-5 years 5-15 years 15-25 years 25 years Total
As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cash inflows
Shareholder derivatives
Derivative assets 13,203 7,117 10,195 23,937 14,292 13,509 69,050
Derivative liabilities (14,097) 7, 24 3 9,662 25,002 12,898 11,199 66,004
Total (894) 14,360 19,857 48,939 27,190 24,708 135,054
Cash outflows
Shareholder derivatives
Derivative assets 13,203 (6,458) (8,293) (19,864) (11,135) (10,017) (55,767)
Derivative liabilities (14,097) (8,261) (12,596) (30,235) (15,500) (13,291) (79,883)
Total (894) (14,719) (20,889) (50,099) (26,635) (23,308) (135,650)
Net cash flows (359) (1,032) (1,160) 555 1,400 (596)
Future cash flows on the floating legs of interest rate and exchange derivatives are calculated using current spot rates, which may differ from the market
expectation incorporated in the fair value.
Cash flows arising from implied events covered by credit derivatives are presented in the tables above on an expected basis as cash flows within
one year.
Cash inflows or outflows are presented on a net basis where the group is required to settle net or has a legally enforceable right of offset and the
intention is to settle on a net basis.
Legal & General Group Plc\u2002Annual Report and Accounts 2022190 Financial statements
Balance sheet management
continued
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13 Receivables and other assets
2022 2021
Notes \u00a3m \u00a3m
Reinsurance receivables 291 84
Receivables under finance leases 13(i) 192 169
Accrued interest and rent 550 378
Prepayments and accrued income 384 289
Insurance and intermediaries receivables 76 69
Inventories
1
1,973 2,044
Contract assets
2
188 322
Other receivables
3
9,632 5,270
Total receivables and other assets 13,286 8,625
Due within 12 months 11,469 7,012
Due after 12 months 1,817 1,613
1. Inventories represent house building stock including land, options on land, work in progress and other inventory.
2. Contract assets represent the entity\u2019s right to consideration in exchange for goods or services that have been transferred to a customer.
3. Other receivables include amounts receivable from brokers and clients for investing activities, collateral pledges, unsettled cash, FX spots and other sundry balances.
(i) Receivables under finance leases
The group leases certain investment properties to third parties. Under these agreements, substantially all the risks and reward incidental to
ownership are transferred to the lessee, and therefore the contracts have been classified as finance leases. At the lease commencement date,
the group derecognises the investment property asset and recognises a receivable asset on its balance sheet to reflect the net investment in
the lease, equal to the present value of the lease payments. The group recognises finance income over the lease term to reflect the rate of return
on the net investment in the lease.
The group acts as a lessor of certain finance leases, which have a weighted average duration to maturity of 31 years as at 31 December 2022.
The counterparties, as lessee, are regarded to be the economic owner of the leased assets.
The future minimum lease payments under the arrangement, together with the present value, are disclosed below:
Total Unearned Total Unearned
future interest Present future interest Present
payments income value payments income value
2022 2022 2022 2021 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Within 1 year 12 (7) 5 10 (5) 5
1-2 years 12 (7) 5 11 (5) 6
2-3 years 12 (7) 5 10 (5) 5
3-4 years 12 (7) 5 10 (5) 5
4-5 years 12 (7) 5 10 (5) 5
After 5 years 266 (99) 167 200 (57) 143
Total 326 (134) 192 251 (82) 169
Legal & General Group Plc\u2002Annual Report and Accounts 2022 191
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14 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, treasury bills and other short-term highly liquid investments
with maturities of three months or less from the date of acquisition.
Unit
Shareholder linked Total
2022 2022 2022
\u00a3m \u00a3m \u00a3m
Cash at bank and in hand 942 1,101 2,043
Cash equivalents 3,892 29,849 33,741
Total cash and cash equivalents 4,834 30,950 35,784
Unit
Shareholder linked Total
2021 2021 2021
\u00a3m \u00a3m \u00a3m
Cash at bank and in hand 1,115 2,702 3,817
Cash equivalents 2,481 10,189 12,670
Total cash and cash equivalents 3,596 12,891 16,487
15 Market risk
(i) Investment performance risk
(a) Equity securities
The group controls its exposure to geographic price risks by using internal country risk exposure limits. These exposure limits are based on
macroeconomic data and key qualitative indicators. The latter take into account economic, social and political environments. The table below indicates
the group\u2019s exposure to different equity markets around the world. Unit linked equity investments are excluded from the table as the risk is retained by
the policyholder.
2022 2021
Exposure to worldwide equity markets \u00a3m \u00a3m
United Kingdom 171 307
North America 176 228
Europe 375 185
Japan 18 17
Asia Pacific 99 36
Other 46 57
Listed equities 885 830
Unlisted equities
1
765 300
Holdings in unit trusts
2
1,421 2,055
Total equities 3,071 3,185
1. Unlisted equities are split between \u00a3532m (2021: \u00a3227m) United Kingdom, \u00a3211m (2021: \u00a367m) rest of Europe and \u00a322m (2021: \u00a36m) North America.
2. Limited Partnerships are included within Holdings in unit trusts.
Legal & General Group Plc\u2002Annual Report and Accounts 2022192 Financial statements
Balance sheet management
continued
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(b) Debt securities
The group controls its exposure to geographic price risks by using internal country credit ratings. These ratings are based on macroeconomic data
and key qualitative indicators. The latter take into account economic, social and political environments. The table below indicates the group\u2019s exposure
to different debt security markets around the world. Unit linked debt securities are excluded from the table as the risk is retained by the policyholder.
Total Total
2022 2021
Total debt securities and accrued interest \u00a3m \u00a3m
United Kingdom 31,291 43,554
USA 26,725 26,859
Netherlands 1,864 2,763
France 921 1,899
Germany 238 640
GIIPS:
\u2013 Ireland 1,648 1,475
\u2013 Italy 30 36
\u2013 Spain 202 278
Belgium 298 394
Rest of Europe 1,888 2,551
Brazil 2 59
Rest of World 5,504 6,228
Collateralised debt obligations
1
52 67
Total 70,663 86,803
1. All CDOs of \u00a352m (2021: \u00a367m) are domiciled in the Rest of World.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 193
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15 Market risk continued
(i) Investment performance risk continued
(c) Additional disclosures on shareholder securities exposure
2022 2022 2021 2021
\u00a3m % \u00a3m %
Sovereigns, supras and sub-sovereigns 8,192 12 14,027 16
Banks:
\u2013 Tier 1 1 \u2013 \u2013 \u2013
\u2013 Tier 2 and other subordinated 152 \u2013 95 \u2013
\u2013 Senior 4,479 6 6,690 8
\u2013 Covered 114 \u2013 138 \u2013
Financial services:
\u2013 Tier 2 and other subordinated 209 \u2013 251 \u2013
\u2013 Senior 1,437 2 1,210 1
Insurance:
\u2013 Tier 2 and other subordinated 267 \u2013 347 \u2013
\u2013 Senior 941 1 1,195 1
Consumer services and goods:
\u2013 Cyclical 3,185 5 3,398 4
\u2013 Non-cyclical 7,037 10 8,272 10
\u2013 Healthcare 2,285 3 2,421 3
Infrastructure:
\u2013 Social 5,521 8 6,975 8
\u2013 Economic 4,904 7 5,959 7
Technology and telecoms 4,405 6 5,062 6
Industrials 1,462 2 1,307 2
Utilities 10,759 15 11,876 14
Energy 1,165 2 1,241 1
Commodities 999 1 1,262 1
Oil and gas 1,709 3 2,175 3
Real estate 3,831 6 3,527 4
Structured finance ABS/RMBS/CMBS/Other 2,713 4 2,451 3
Lifetime mortgage loans 4,844 7 6,857 8
Collateralised debt obligations 52 \u2013 67 \u2013
Total 70,663 100 86,803 100
2022 2021
Analysis of sovereigns, supras and sub-sovereigns \u00a3m \u00a3m
Market value by region
United Kingdom 5,209 9,829
USA 1,754 1,892
Netherlands 31 23
France 106 485
Germany 95 380
Ireland 187 302
Belgium 6 \u2013
Rest of Europe 189 54
Rest of World 615 1,062
Total 8,192 14,027
Legal & General Group Plc\u2002Annual Report and Accounts 2022194 Financial statements
Balance sheet management
continued
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(ii) Currency risk
The group has minimal exposure to currency risk from financial instruments held by business units in currencies other than their functional currencies,
nearly all such holdings are either backing insurance contracts in the same currency or are hedged back to GBP.
The group operates internationally and as a result is exposed to foreign currency exchange risk arising from fluctuations in exchange rates of various
currencies. The largest United States dollar currency exposures relate to the group\u2019s US business, Legal & General America. The majority of currency
exposures relating to euros are held by Legal & General Investment Management (Europe) Limited, a subsidiary of Legal & General Investment
Management (Holdings) Limited. The group does not hedge foreign currency revenues as these are substantially retained locally to support the
growth of the group\u2019s business and meet local regulatory and market requirements.
Businesses aim to maintain sufficient assets in local currency to meet local currency liabilities, however movements may impact the value of the group\u2019s
consolidated shareholders\u2019 equity which is expressed in sterling. This aspect of foreign exchange risk is monitored and managed centrally, against
pre-determined limits. These exposures are managed by aligning the deployment of regulatory capital by currency with the group\u2019s regulatory capital
requirements by currency. Currency borrowings and derivatives may be used to manage exposures within the limits that have been set.
As at 31 December 2022, the group held net liabilities of \u00a34.3bn (2021: net assets of \u00a30.5bn) in currencies, mainly United States dollar and euro, other
than the functional currency of the relevant business unit. The exchange risks inherent in these exposures may be mitigated through the use of
derivatives, mainly forward currency contracts.
Consistent with the group\u2019s accounting policies, the profits of overseas business units (reported as functional currencies) are translated at average
exchange rates and the net assets (reported as functional currencies) at the closing rate for the reporting period. A 10% increase (weakening of foreign
currencies) or decrease (strengthening of foreign currencies) in these rates would increase or reduce the profit for the year and net assets as follows:
A 10% increase in A 10% decrease in
USD:GBP exchange rate USD:GBP exchange rate
2022 2021 2022 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Profit for the year
1
(25) (2) 30 3
Net assets attributable to USD exposures
1
358 (19) (437) 23
A 10% increase in A 10% decrease in
EUR:GBP exchange rate EUR:GBP exchange rate
2022 2021 2022 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Profit for the year
1
\u2013 (1) \u2013 1
Net assets attributable to EUR exposures
1
37 (39) (45) 47
1. Profit for the year impacts relate only to overseas business units where the functional currency is not sterling. Net asset impacts include both functional currency and non-functional
currency exposures.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 195
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16 Credit risk
The credit profile of the group\u2019s assets exposed to credit risk is shown below. The credit rating bands are provided by independent rating agencies.
For unrated assets, the group maintains internal ratings which are used to manage exposure to these counterparties. Unit linked assets have not been
included as shareholders are not directly exposed to the associated credit risk. Additionally, assets such as equity securities, deferred acquisition
costs and tax have no exposure to the associated credit risk and therefore have also been excluded.
The carrying amount of the financial assets recorded in the financial statements represents the maximum exposure to credit risk.
Shareholder
Internally
BB and rated and
AAA AA A BBB below other
1
Total
As at 31 December 2022 Notes \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Government securities 1,445 3,691 166 105 8 90 5,505
Other fixed rate securities 1,957 4,757 13,662 15,415 446 13,717 49,954
Variable rate securities 306 2,056 1,864 2,701 70 2,729 9,726
Lifetime mortgages \u2013 \u2013 \u2013 \u2013 \u2013 4,844 4,844
Accrued interest 33 73 183 255 5 85 634
Total debt securities
1
10(i) 3,741 10,577 15,875 18,476 529 21,465 70,663
Loans 10(ii) \u2013 303 318 47 9 423 1,100
Derivative assets 12 1 29 38,829 2,938 \u2013 181 41,978
Cash and cash equivalents 14 412 2,067 1,496 77 \u2013 782 4,834
Reinsurers\u2019 share of contract liabilities \u2013 4,138 1,596 999 \u2013 222 6,955
Other assets 145 300 672 68 1 6,288 7,474
Total 4,299 17,414 58,786 22,605 539 29,361 133,004
1. Of the total debt securities and accrued interest that have been internally rated and unrated, \u00a33,549m is rated AAA, \u00a32,443m AA, \u00a38,029m A, \u00a36,964m BBB, \u00a3376m BB or below and
\u00a3104m as other.
Internally
BB and rated and
AAA AA A BBB below other
1
Total
As at 31 December 2021 Notes \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Government securities 1,722 7,38 9 144 348 9 474 10,086
Other fixed rate securities 1,619 6,146 18,391 17,723 865 14,062 58,806
Variable rate securities 143 1,953 2,539 2,413 64 3,388 10,500
Lifetime mortgages \u2013 \u2013 \u2013 \u2013 \u2013 6,857 6,857
Accrued interest 22 56 166 231 12 67 554
Total debt securities
1
10(i) 3,506 15,544 21,240 20,715 950 24,848 86,803
Loans 10(ii) 61 1,309 779 153 \u2013 30 2,332
Derivative assets 12 \u2013 \u2013 11,176 1,925 \u2013 102 13,203
Cash and cash equivalents 14 694 648 1,924 80 \u2013 250 3,596
Reinsurers\u2019 share of contract liabilities \u2013 5,656 1,127 1 \u2013 396 7,180
Other assets 57 35 592 32 7 5,951 6,674
Total 4,318 23,192 36,838 22,906 957 31,577 119,788
1. Of the total debt securities and accrued interest that have been internally rated and unrated, \u00a34,617m is rated AAA, \u00a33,649m AA, \u00a38,675m A, \u00a37,465m BBB, \u00a3417m BB or below and
\u00a325m as other.
Impairment
The group reviews the carrying value of its financial assets (other than those held at FVTPL) at each balance sheet date. If the carrying value of a
financial asset is impaired, the carrying value is reduced through a charge to the Consolidated Income Statement. There must be objective evidence
of impairment as a result of one or more events which have occurred after the initial recognition of the asset. Impairment is only recognised if the loss
event has an impact on the estimated future cash flows of assets held at amortised cost or on the fair value of assets classified as available for sale.
The table below includes assets at FVTPL and held at amortised cost, and provides information regarding the carrying value of financial assets which
have been impaired, as well as the ageing analysis of financial assets which are past due but not impaired. Unit linked assets have not been included as
shareholders are not exposed to the risks from unit linked policies.
Legal & General Group Plc\u2002Annual Report and Accounts 2022196 Financial statements
Balance sheet management
continued
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Ageing analysis
Past due but not impaired
Neither past
due nor 0-3 3-6 6 months- Over Carrying
impaired months months 1 year 1 year Impaired value
As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Shareholder 131,971 761 226 22 24 \u2013 133,004
Past due but not impaired
Neither past
due nor 0-3 3-6 6 months- Over Carrying
impaired months months 1 year 1 year Impaired value
As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Shareholder 119,600 132 23 16 17 \u2013 119,788
Offsetting
Financial assets and liabilities are offset in the Consolidated Balance Sheet when the group has a legally enforceable right to offset and has the intention
to settle the asset and liability on a net basis, or to realise the asset and liability simultaneously.
The group has not entered into any financial transactions resulting in financial assets and liabilities being offset in the Consolidated Balance Sheet. The
table below shows the financial assets and liabilities that are subject to master netting agreements in shareholder funds. Unit linked assets and liabilities
have not been included as shareholders are not exposed to the risks on these policies.
Amounts subject to enforceable netting arrangements
Amounts under master netting arrangements
but not offset
Gross and
net amounts
reported in the
Consolidated Related Securities
Balance financial Cash collateral Net
Sheet instruments
1
collateral
2
pledged
2
amount
As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Derivative assets 41,978 (40,999) (924) (55) \u2013
Reverse repurchase agreements 1,072 \u2013 \u2013 (1,072) \u2013
Total 43,050 (40,999) (924) (1,127) \u2013
Derivative liabilities (46,105) 40,999 2,212 2,894 \u2013
Repurchase agreements (837) \u2013 \u2013 837 \u2013
Total (46,942) 40,999 2,212 3,731 \u2013
Amounts subject to enforceable netting arrangements
Amounts under master netting arrangements
but not offset
Gross and
net amounts
reported in the
Consolidated Related Securities
Balance financial Cash collateral Net
Sheet instruments
1
collateral
2
pledged
2
amount
As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Derivative assets 13,203 (11,720) (789) (694) \u2013
Reverse repurchase agreements 2,240 \u2013 \u2013 (2,240) \u2013
Total 15,443 (11,720) (789) (2,934) \u2013
Derivative liabilities (14,097) 11,720 1,895 482 \u2013
Repurchase agreements (1,116) \u2013 \u2013 1,116 \u2013
Total (15,213) 11,720 1,895 1,598 \u2013
1. Related financial instruments represent outstanding amounts with the same counterparty which, under agreements such as the ISDA Master Agreement, could be offset and settled net
following certain predetermined events.
2. Cash and securities held may exceed target levels due to the complexities of operational collateral management, timing and the agreements in place with individual counterparties.
In the tables above, the amounts of assets or liabilities presented in the Consolidated Balance Sheet are offset first by financial instruments that have the
right of offset under master netting or similar arrangements with any remaining amount reduced by cash and securities collateral. The actual amount of
collateral may be greater than the amounts presented in the tables above.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 197
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17 Insurance risk
The group is exposed to insurance risk as a consequence of offering the principal products outlined in Note 6. Insurance risk is the exposure to loss
arising from insurance risk experience being different to that anticipated. Detailed below are the insurance risks associated with each of the group\u2019s
segments along with the mitigating controls operated. They are applicable to all stated products across the group.
Principal risks Division Controls to mitigate risks
Longevity, mortality & morbidity risks
For contracts providing death benefits, higher mortality
rates would lead to an increase in claims costs. The cost of
health related claims depends on both the incidence of
policyholders becoming ill and the duration over which they
remain ill. Higher than expected incidence or duration
would increase costs over the level currently assumed in
the calculation of liabilities.
Retail The pricing of protection business is based on assumptions as to future trends in mortality and
morbidity having regard to past experience. Underwriting criteria are defined setting out the risks
that are unacceptable and the terms for non-standard risks presented by the lives to be insured.
Extensive use of reinsurance is made within the UK retail protection business, placing a
proportion of all risks meeting prescribed criteria. Mortality and morbidity experience is
compared to that assumed within the pricing basis with variances subject to actuarial
investigation.
For annuity contracts, the group is exposed to the risk that
mortality experience is lower than assumed. Lower than
expected mortality would require payments to be made for
longer and increase the cost of benefits provided. Lifetime
mortgage business also explicitly has some exposure to
the life expectancy of borrowers.
LGRI and
Retail
Annuity business is priced having regard to trends in improvements in future mortality.
Enhanced annuities, which are priced taking account of impairments to life expectancy, are
subject to specific underwriting criteria. Certain annuitant mortality risks, including enhanced
annuities, are placed with reinsurers. The group regularly reviews its mortality experience and
industry projections of longevity and adjusts the pricing and valuation assumptions accordingly.
In pricing lifetime mortgage business, account is taken of trends in mortality rates in setting the
amounts that are advanced to borrowers relative to the value of the property on which the loan is
secured.
Persistency risk
In the early years of a policy, lapses may result in a loss to
the group, as the acquisition costs associated with the
contract would not have been recovered from product
margins.
Retail The pricing and valuation assumptions for protection business include provision for policy
lapses. Actual trends in policy lapse rates are monitored against these assumptions with
variances being subject to actuarial investigation.
Expense risk
In pricing long-term insurance business, assumptions are
made as to the future cost of product servicing. A
significant adverse divergence in actual expenses
experience could reduce product profitability.
LGRI and
Retail
In determining pricing assumptions, account is taken of expected price and wage inflation, with
stress testing used to evaluate the effect of significant deviations. Actual product servicing costs
are monitored relative to the costs assumed with the product pricing basis, with variances
investigated.
Concentration (catastrophe) risk
Insurance risk may be concentrated in geographic regions,
altering the risk profile of the group. The most significant
exposure of this type arises for group protection business,
where a single event could result in a large number of
related claims.
Retail Group protection business contracts include an \u2018event limit\u2019 capping the total liability under the
policy from a single event. Excess of loss reinsurance further mitigates loss from the exposure.
Additionally, exposure by location is monitored to ensure there is a geographic spread of risk.
Catastrophe reinsurance cover also mitigates loss from concentrations of risk.
Epidemic (catastrophe) risk
The spread of an epidemic could cause large aggregate
claims across the group\u2019s portfolio of protection
businesses.
Retail The pricing basis for protection business includes an assessment of potential claims as a result
of epidemic risks. Quota share and excess of loss reinsurance contracts are used by individual
and group protection, respectively, to further mitigate the risk. Depending on the nature of an
epidemic, mortality experience may lead to a reduction in the cost of claims for annuity
business. Pricing for new business can also be updated to reflect the change in expected claims.
Accumulation of risks
There is limited potential for single incidents to give rise to a large number of claims across the different contract types written by the group.
However, there are potentially material correlations of insurance risk with other types of risk exposure. The group\u2019s capital model seeks to measure
risk correlations particularly those that would tend to be more acute as the underlying risk scenarios become more extreme. An example of the
accumulation of risk is the correlation between reinsurer credit risk with mortality and morbidity exposures.
Operational risk
Operational risk is defined as loss arising from inadequate or failed internal processes, people, systems or external events. Potential for exposure
to such risk extends to all of the group\u2019s businesses. The group has constructed a framework of internal controls to minimise material loss from
operational risk events recognising that no system of internal control can completely eliminate the risk of error, financial loss, fraudulent action or
reputational damage.
Legal & General Group Plc\u2002Annual Report and Accounts 2022198 Financial statements
Balance sheet management
continued
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18 Long-term insurance valuation assumptions
The group\u2019s insurance assumptions, described below, relate to the UK insurance businesses and material lines of the US insurance business,
Legal & General America (LGA). Other non-UK businesses do not constitute a material component of the group\u2019s operations and consideration
of geographically determined assumptions is therefore not included.
The group seeks to make prudent assumptions about future experience based on current market conditions and recent experience. Assumptions
incorporate prudent margins in excess of our best estimate assumptions to reduce the possibility of actual experience being less favourable
than assumed.
(i) Mortality and morbidity
Mortality and morbidity assumptions for the UK business are set with reference to standard tables drawn up by the Continuous Mortality Investigation
(CMI), a subsidiary of the Institute and Faculty of Actuaries, and/or UK death registrations. US assumptions are set with reference to standard tables
drawn up by the American Academy of Actuaries. Assumptions include an appropriate allowance for prudence. Tables are based on industry-wide
mortality and morbidity experience for insured lives.
The group conducts statistical investigations of its mortality and morbidity experience, the majority of which are carried out at least annually.
Investigations determine the extent to which the group\u2019s experience differs from that underpinning the standard tables, and suggest appropriate
adjustments which need to be made to the valuation assumptions.
The higher mortality experience observed in 2020 as a result of Covid-19 is considered to be exceptional and, due to insufficient certainty in more
recent data, long-term mortality assumptions have not taken this experience into account.
In most cases, mortality rates are set separately for sex and smoker status, and the percentage of mortality table will vary for the first 2-5 years
of the policy\u2019s duration to allow for underwriting selection.
Mortality tables 2022 2021
Non-linked individual assurance business
UK term assurances
1
99%\u2013101% TM08/TF08 Sel 5 99%\u2013101% TM08/TF08 Sel 5
UK term assurances with terminal illness
1
63%\u201395% TM08/TF08 Sel 5 63%\u201395% TM08/TF08 Sel 5
UK term assurances with critical illness
2
109%\u2013159% ACL08 Sel 2 107%\u2013159% ACL08 Sel 2
US term assurances
3
Adjusted SOA 2014 VBT Adjusted SOA 2014 VBT
Whole of Life Protection Plan
4
Bespoke Tables based on
TM08/TF08, PCMA00/PCFA00
and UK death registrations
Bespoke Tables based on
TM08/TF08, PCMA00/PCFA00
and UK death registrations
Whole of Life over 50
4
Bespoke Tables based on ELT15
and Whole of Life Protection
Plan assumptions
Bespoke Tables based on ELT15
and Whole of Life Protection
Plan assumptions
Annuity business
UK Annuities in deferment
5
70.4%\u201380.5% PNMA00/PNFA00 70.9%\u201381.1% PNMA00/PNFA00
UK Vested annuities
6
Pension risk transfer 71.2%\u201380.5% PCMA00/PCFA00 71.6%\u201381.1% PCMA00/PCFA00
Other annuities 59.8%\u201395.4% PCMA00/PCFA00 59.3%\u201398.4% PCMA00/PCFA00
US annuities
7
Bespoke tables based on RP\u20132014
Healthy Annuitant Total table
Bespoke tables based on RP\u20132014
Healthy Annuitant Total table
1. Improvement assumptions applied of 0.6% p.a. for males and females (2021: 0.6% p.a. for males and females).
2. Morbidity rates are assumed to deteriorate at a rate of 0.50% p.a. for males and 0.75% p.a. for females (2021: 0.50% p.a. for males and 0.75% p.a. for females).
3. Adjustments are made for sex, select period, smoker status, policy size, policy duration and year, issue year and age.
4. Mortality rates are assumed to reduce based on CMI 2020 model with a long-term annual improvement rate of 1.5% for males and 1.0% for females (2021: Mortality rates are assumed
to reduce based on CMI 2019 model with a long-term annual improvement rate of 1.5% for males and 1.0% for females).
5. Table created by blending PCXA00 with PNXA00 tables. The base table to be used for bulk purchase annuity policies in deferment is PNMA00 up to and including age 55 and PCMA00
for age 65 and above for males. The identical method is applied to females using PNFA00 and PCFA00.
6. Mortality rates are assumed to reduce according to an adjusted version of the mortality improvement model CMI 2020 (2021: CMI 2019) with the following parameters:
Males: Long-term Rate of 1.50% p.a. up to age 85 tapering to 0% at 110 (2021: Long-term Rate of 1.50% p.a. up to age 85 tapering to 0% at 110).
Females: Long-term Rate of 1.00% p.a. up to age 85 tapering to 0% at 110 (2021: Long-term Rate of 1.00% p.a. up to age 85 tapering to 0% at 110).
Smoothing is applied to derive initial rates using a smoothing parameter (Sk) value of 7.5 applied to L&G bespoke population data up to 2020. The resulting initial rates are then adjusted
to reflect socio economic class (2021: smoothing parameter (Sk) value of 7.5 applied to L&G bespoke population data to 2019).
For individual annuities distributed through retail channels, a further allowance is made for the effect of initial selection.
The basis above is applicable up to age 90. After age 90 the basis is blended towards a bespoke table from age 105 onwards.
7. Improvement table is MP2018 for Females and MP2019 for Males (2021: Improvement table is MP2018 for Females and MP2019 for Males).
Legal & General Group Plc\u2002Annual Report and Accounts 2022 199
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18 Long-term insurance valuation assumptions continued
(ii) Valuation rates of interest and discount rates
The valuation interest rate used to discount the cash flows for the purpose of valuing insurance contract liabilities is based on the yield on the assets
backing the contract.
For annuity business, an explicit allowance for risk is deducted from the yield. The allowance for risk comprises long-term assumptions about defaults on a
prudent basis or, in the case of lifetime mortgage assets, a prudent expectation of losses arising from the No Negative Equity Guarantee. These allowances
vary by asset category and for some asset classes by rating. The allowance for risk for government backed bonds equated to 9bps (2021: 9bps) and 42bps
for corporate bonds and direct investments (2021: 43bps). This is equivalent to a default provision of \u00a32.2bn at 31 December 2022 (2021: \u00a33.4bn). For
lifetime mortgage business, the allowance for risk in respect of lifetime mortgage assets is equivalent to \u00a30.4bn at 31 December 2022 (2021: \u00a30.6bn).
For UK assurance business, different rates apply depending on whether the liabilities are positive or negative. An appropriate valuation interest rate is
applied at all times during the projection, i.e. when liabilities switch from being negative to positive the valuation interest rate will also switch from being
high to low. The crossover point at which the margin changes direction is assessed for broad product groups but applied at a policy by policy level.
For US assurance business, the valuation interest rate is derived by combining the risk free yield curve (based on US Treasuries) plus a risk adjusted
spread addition based on the portfolio of assets LGA invest in. It includes prudent adjustments for default and reinvestment risk.
Rate of interest/discount rates 2022 2021
UK Life assurances 4.23%\u20135.09% p.a. 1.40%\u20132.52% p.a.
UK Pension assurances 4.23%\u20135.09% p.a. 1.40%\u20132.52% p.a.
US Life assurances 2.78%\u20136.65% p.a. 1.20%\u20133.80% p.a.
UK Annuities \u2013 Fixed 4.94% p.a. 1.78% p.a.
UK Annuities \u2013 Index Linked 1.20% p.a. (1.88%) p.a.
US Annuities 5.29% p.a. 2.62% p.a.
(iii) Persistency
The group monitors its persistency experience and carries out detailed investigations annually. Persistency experience can be volatile and past
experience may not be an appropriate future indicator.
The group tries to balance past experience and potential future conditions by making prudent assumptions about expected long-term average
persistency levels.
Where explicit persistency assumptions are not made, prudence is also incorporated into the liabilities by ensuring that they are sufficient to cover the
more onerous of the two scenarios where the policies either remain in-force until maturity or where they discontinue at the valuation date.
For UK term assurance business, the margin acts to increase the best estimate lapse rate in the early part of a policy\u2019s lifetime (when it is treated as an
asset) but to reduce the best estimate lapse rate later in the policy\u2019s lifetime (when it is treated as a liability). The crossover point at which the margin
changes direction is assessed for broad product groups but applied at a policy by policy level. Any liability to reinsurers on discontinuance within the first
four years from inception is allowed for explicitly in the cash flows, using the valuation lapse basis, together with a prudent allowance for clawback of
commission from agents upon lapse.
For US term assurance, a single margin is used across guaranteed period durations for a given policy. All US term assurance contracts are assumed to lapse
at the end of the guaranteed period. Policies past the guaranteed period as of the valuation date are assumed to lapse on the next premium due date.
Lapse rates 2022 2021
UK Level term 1.6%\u201335.0% 1.6%\u201334.5%
UK Decreasing term 5.3%\u201318.0% 5.3%\u201318.0%
UK Accelerated critical illness cover 2.6%\u201337.8% 2.6%\u201337. 3%
Pensions term 2.3%\u20133.5% 2.3%\u20133.8%
Whole of Life (conventional non profit) 0.4%\u20136.0% 0.5%\u20136.1%
US term \u2013 10 year guarantee period 5.7%\u20136.5% 5.7%\u20136.5%
US term \u2013 15 year guarantee period 3.4%\u20134.6% 3.4%\u20134.6%
US term \u2013 20 year guarantee period 2.4%\u20134.9% 2.4%\u20134.9%
US term \u2013 30 year guarantee period 1.7%\u20135.2% 1.7%\u20135.2%
US Universal Life 1.9% 1.9%
(iv) Expenses
The group monitors its expense experience and carries out detailed investigations regularly to determine the expenses incurred in writing and
administering the different products and classes of business. Adjustments may be made for known future changes in the administration processes,
in line with the group\u2019s business plan, as well as for changes in allocations. An allowance for expense inflation in the future is also made in line with RPI,
taking account of both salary and price information. The expense assumptions and expense inflation assumption include an appropriate allowance
for prudence.
Legal & General Group Plc\u2002Annual Report and Accounts 2022200 Financial statements
Balance sheet management
continued
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19 IFRS sensitivity analysis
Impact on Impact on
pre-tax Impact on pre-tax Impact on
group profit group equity group profit group equity
net of net of net of net of
reinsurance reinsurance reinsurance reinsurance
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Economic sensitivity
100bps increase in interest rates (98) (66) 55 188
100bps decrease in interest rates 44 16 (195) (317)
50bps increase in future inflation expectations (45) (33) (41) (60)
50bps decrease in future inflation expectations 82 65 39 58
Credit spreads widen by 100bps with no change in expected defaults (345) (352) (311) (234)
25% rise in equity markets 381 316 513 423
25% fall in equity markets (381) (316) (513) (423)
15% rise in property values 1,177 974 1,299 1,084
15% fall in property values (1,233) (1,022) (1,368) (1,144)
10bps increase in credit default assumptions (545) (465) (765) (651)
10bps decrease in credit default assumptions 546 465 754 642
Non-economic sensitivity
1% increase in annuitant mortality 141 122 166 146
1% decrease in annuitant mortality (139) (121) (170) (150)
5% increase in assurance mortality (398) (315) (451) (357)
10% increase in maintenance expenses (224) (185) (254) (208)
The table above shows the impacts on group pre-tax profit and equity, net of reinsurance, under each sensitivity scenario. The group pre-tax profit and
equity impacts may arise from asset and/or liability movements under the sensitivities. The current disclosure reflects management\u2019s view of key risks
in current economic conditions.
In calculating the alternative values, all other assumptions are left unchanged. In practice, impacts of the group\u2019s experience may be correlated.
The sensitivity analyses do not take into account management actions that could be taken to reduce the impacts. The group seeks to actively manage
its asset and liability position. A change in market conditions may lead to changes in the asset allocation or charging structure which may have a more,
or less, significant impact on the value of the liabilities. The analysis also ignores any second order effects of the assumption change, including the
potential impact on the group asset and liability position and any second order tax effects.
The sensitivity of profit to changes in assumptions may not be linear. They should not be extrapolated to changes of a much larger order.
The change in interest rate stresses assume a 100 basis point increase/decrease in the gross redemption yield on fixed interest securities together with
the same change in the real yields on variable securities. Valuation interest rates are assumed to move in line with market yields, adjusted to allow for
prudence calculated in a manner consistent with the base results.
The inflation stresses adopted are a 0.5% per annum (p.a.) increase/decrease in inflation, resulting in a 0.5% p.a. reduction/rise in real yield and no
change to the nominal yield. In addition, the expense inflation rate is increased/decreased by 0.5% p.a.
In the sensitivity for credit spreads, corporate bond yields have increased by 100bps, gilt and approved security yields unchanged, and there has been
no adjustment to the default assumptions. All lifetime mortgages are excluded, as their primary exposure is to property risk, and therefore captured
under the property stress.
The equity stresses are a 25% rise and 25% fall in listed equity market values.
The property stresses adopted are a 15% rise and 15% fall in property market values including lifetime mortgages. Rental income is assumed to be
unchanged. Where property is being used to back liabilities, valuation interest rates move with property yields, and so the value of the liabilities will
also move.
The credit default assumption is set based on the credit rating of individual bonds and their outstanding term using Moody\u2019s global credit default rates.
The credit default stress assumes a +/-10bps stress to the current unapproved credit default assumption, which will have an impact on the valuation
interest rates used to discount liabilities. Other credit default allowances are unchanged. All lifetime mortgages are excluded, as their primary exposure
is to property risk, and therefore captured under the property stress.
The annuitant mortality stresses are a 1% increase and 1% decrease in the mortality rates for immediate and deferred annuitants with no change to the
mortality improvement rates.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 201
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19 IFRS sensitivity analysis continued
The assurance mortality stress is a 5% increase in the mortality and morbidity rates with no change to the mortality and morbidity improvement rates.
The maintenance expense stress is a 10% increase in all types of maintenance expenses in future years.
20 Insurance contract liabilities
Insurance contracts are contracts which transfer significant insurance risk to the insurer at the inception of the contract. This is the case if, and
only if, an insured event could cause an insurer to make significant additional payments in any scenario, other than a scenario which lacks
commercial substance. Such contracts remain insurance contracts until all rights and obligations are extinguished or expire. Contracts can be
reclassified as insurance contracts after inception if insurance risk becomes significant. Any contracts not considered to be insurance contracts
under IFRS are classified as investment contracts.
Long-term insurance
Death claims are accounted for on notification of death. Surrenders for non-linked policies are accounted for when payment is made. Critical
illness claims are accounted for when admitted. All other long-term claims and surrenders are accounted for when payment is due. Claims payable
include the direct costs of settlement.
The change in the insurance liability reflects the reduction in liabilities as claims are paid throughout the year, offset by liabilities arising from new
business. The movement also reflects changes in expectations of future claims payments and expenses, plus changes in valuation interest rates,
as set out in Note 18.
Under current IFRS requirements, insurance contract liabilities are measured using local Generally Accepted Accounting Principles (GAAP), as
permitted by IFRS 4, \u2018Insurance Contracts\u2019.
For non-participating insurance contracts, the liabilities are calculated on the basis of current information using the gross premium valuation
method. This brings into account the full premiums receivable under contracts written, having prudent regard to expected lapses and surrenders,
estimated renewal and maintenance costs, and contractually guaranteed benefits. For unit linked insurance contract liabilities the provision is
based on the fund value together with an allowance for any excess of future expenses over charges where appropriate.
Reinsurance
The group\u2019s insurance subsidiaries cede insurance premiums and risk in the normal course of business in order to limit the potential for losses and
to provide financing. Outwards reinsurance premiums are accounted for in the same accounting period as the related premiums for the direct or
inwards reinsurance business being reinsured. Reinsurance assets include balances due from reinsurers for paid and unpaid losses and loss
adjustment expenses, ceded unearned premiums and ceded future life policy benefits. Amounts recoverable from reinsurers are estimated in a
manner consistent with the claim liability associated with the reinsured policy. An impairment occurs when there is objective evidence, as a result
of an event that occurred after initial recognition of the reinsurance asset, that the group may not receive all outstanding amounts due, and the
event has a reliably measurable impact on the amounts that it will receive from the reinsurer. If a reinsurance asset is impaired, the group reduces
its carrying amount accordingly and recognises that impairment loss in the Consolidated Income Statement.
Reinsurance is recorded as an asset in the Consolidated Balance Sheet unless a right of offset exists, in which case the associated liabilities are
reduced commensurately.
Contracts with reinsurers are assessed to determine whether they contain significant insurance risk. Contracts that do not give rise to significant
transfer of insurance risk to the reinsurer are considered to be financial reinsurance and are accounted for and disclosed in a manner consistent
with financial instruments.
Legal & General Group Plc\u2002Annual Report and Accounts 2022202 Financial statements
Balance sheet management
continued
13.2_Financial_statements_v3.indd 20213.2_Financial_statements_v3.indd 202 14/03/2023 20:2114/03/2023 20:21
(i) Analysis of non-participating insurance contract liabilities
Gross Reinsurance Gross Reinsurance
2022 2022 2021 2021
Note \u00a3m \u00a3m \u00a3m \u00a3m
Non-participating insurance contracts 20(iii) 70,275 (6,897) 89,755 (7,138)
General insurance contracts 62 (58) 70 (42)
Insurance contract liabilities 70,337 (6,955) 89,825 (7,180)
(ii) Expected non-participating insurance contract liability cash flows
Undiscounted cash flows
0-5 5-15 15-25 Over 25
years years years years Total
As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Non-participating insurance contract liabilities 20,386 41,482 27,0 04 23,941 112,813
Undiscounted cash flows
0-5 5-15 15-25 Over 25
years years years years Total
As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Non-participating insurance contract liabilities 18,603 35,185 23,439 22,039 99,266
Non-participating insurance contract undiscounted cash flows are based on the expected date of settlement.
(iii) Movement in non-participating insurance contract liabilities
Gross Reinsurance
1
Gross Reinsurance
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
As at 1 January 89,755 (7,138) 88,958 (6,936)
New liabilities in the year 9,051 (1,730) 6,976 (1,296)
Liabilities discharged in the year (5,311) (233) (4,74 4) 390
Unwinding of discount rates 1,812 (256) 1,250 (141)
Effect of change in non-economic assumptions (1,022) 578 (787) 408
Effect of change in economic assumptions (24,891) 2,033 (1,971) 519
Foreign exchange adjustments 829 (181) (35) (12)
Modelling and methodology changes 36 26 37 6
Other 16 4 71 (76)
Total as at 31 December 70,275 (6,897) 89,755 ( 7,13 8)
Expected to be settled within 12 months (net of reinsurance) 2,356 1,838
Expected to be settled after 12 months (net of reinsurance) 61,022 80,779
1. Liabilities discharged in the year include movement arising from the reinsurance of the in-force universal life book in the US protection business.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 203
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21 Investment contract liabilities
Non-participating investment contract liabilities are measured at fair value. For unit linked liabilities, fair value is determined by reference to the
value of the underlying net asset values of the group\u2019s unitised investment funds at the balance sheet date. For non-linked liabilities, fair value is
based on a discounted cash flow analysis which incorporates an appropriate allowance for credit default risk.
Deposits collected and claims are not included in the income statement but are added or deducted from investment contract liabilities.
(i) Analysis of non-participating investment contract liabilities
Gross Reinsurance Gross Reinsurance
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Non-participating investment contract liabilities 286,830 \u2013 372,954 \u2013
Expected to be settled within 12 months (net of reinsurance) 31,649 45,483
Expected to be settled after 12 months (net of reinsurance) 255,181 327,471
Amounts under unit linked contracts are generally repayable on demand and the group is responsible for ensuring there is sufficient liquidity within the
asset portfolio to enable liabilities to unit linked policyholders to be met as they fall due. However, the terms of funds investing in less liquid assets permit
the deferral of redemptions for predefined periods in circumstances where there are not sufficient liquid assets within the fund to meet the level of
requested redemptions.
Non-participating investment contract liabilities include \u00a3901m (2021: \u00a31,413m) of Assured Payment Policies (APP) products, which are classified as
Level 2 in the fair value hierarchy. The valuation of APP products is determined through a discounted cash flows model, where the discount rate is
derived from a risk-free rate, a credit benchmark spread and a zero-volatility spread (Z-spread). The credit benchmark rate used is the A-rated credit
spread curve which reflects the strategic portfolio mix. The Z-spread ensures that the fair value at inception is equal to the transaction price, therefore it
is based on the premium on origination and remains constant over the life of the policy.
The presented fair values of the remaining non-participating investment contract liabilities reflect quoted prices in active markets and they have been
classified as Level 1 in the fair value hierarchy.
During the year there have been no transfers of non-participating investment contract liabilities between levels of the fair value hierarchy (2021: no
significant transfers between levels of the fair value hierarchy).
(ii) Movement in non-participating investment contract liabilities
Gross Reinsurance Gross Reinsurance
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
As at 1 January 372,954 \u2013 343,543 (3)
Reserves in respect of new business 54,355 \u2013 55,434 \u2013
Amounts paid on surrenders and maturities during the year (60,338) \u2013 (60,132) 3
Investment return (80,043) \u2013 34,206 \u2013
Management charges (98) \u2013 (97) \u2013
Total as at 31 December 286,830 \u2013 372,954 \u2013
Legal & General Group Plc\u2002Annual Report and Accounts 2022204 Financial statements
Balance sheet management
continued
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22 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs. Borrowings are subsequently stated at amortised cost. The difference
between the net proceeds and the redemption value is recognised in the income statement over the borrowing period using the effective interest
rate method.
Borrowings comprise core borrowings such as subordinated Tier 2 bond issues, long-term unsecured senior debt and operational borrowings such as
commercial paper issuance and bank borrowings under both committed and uncommitted debt facilities, including bank overdrafts. Borrowings
secured on specific assets/cash flows are included as non-recourse borrowings.
(i) Analysis by type
Borrowings Borrowings
excluding excluding
unit Unit unit Unit
linked linked linked linked
borrowings borrowings Total borrowings borrowings Total
2022 2022 2022 2021 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Core borrowings 4,338 \u2013 4,338 4,256 \u2013 4,256
Operational borrowings 963 256 1,219 924 8 932
Total borrowings 5,301 256 5,557 5,180 8 5,188
\u00a3214m of interest expense was incurred during the year (2021: \u00a3229m) on borrowings excluding non-recourse and unit linked borrowings. The total
finance costs incurred in the year were \u00a3290m (2021: \u00a3294m), which also includes \u00a38m of finance costs on lease liabilities (2021: \u00a310m).
(ii) Analysis by nature
(a) Core borrowing
Carrying Coupon Carrying Coupon
amount rate Fair value amount rate Fair value
2022 2022 2022 2021 2021 2021
\u00a3m % \u00a3m \u00a3m % \u00a3m
Subordinated borrowings
5.5% Sterling subordinated notes 2064 (Tier 2) 590 5.50 541 590 5.50 776
5.375% Sterling subordinated notes 2045 (Tier 2) 605 5.38 593 604 5.38 673
5.25% US Dollar subordinated notes 2047 (Tier 2) 712 5.25 665 635 5.25 694
5.55% US Dollar subordinated notes 2052 (Tier 2) 417 5.55 389 373 5.55 428
5.125% Sterling subordinated notes 2048 (Tier 2) 400 5.13 377 400 5.13 461
3.75% Sterling subordinated notes 2049 (Tier 2) 599 3.75 507 598 3.75 632
4.5% Sterling subordinated notes 2050 (Tier 2) 500 4.50 439 500 4.50 558
Client fund holdings of group debt (Tier 2)
1
(74) \u2013 (67) (44) \u2013 (51)
Total subordinated borrowings 3,749 \u2013 3,444 3,656 \u2013 4,171
Senior borrowings
Sterling medium term notes 2031-2041 609 5.87 649 609 5.87 846
Client fund holdings of group debt
1
(20) \u2013 (19) (9) \u2013 (11)
Total senior borrowings 589 \u2013 630 600 \u2013 835
Total core borrowings 4,338 \u2013 4,074 4,256 \u2013 5,006
1. \u00a394m (31 December 2021: \u00a353m) of the group\u2019s subordinated and senior borrowings are held by Legal & General customers through unit linked products. These borrowings are shown
as a deduction from total core borrowings in the table above.
The presented fair values of the group\u2019s core borrowings reflect quoted prices in active markets and they have been classified as Level 1 in the fair
value hierarchy.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 205
Strategic report Governance Financial statements Other information
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22 Borrowings continued
(ii) Analysis by nature continued
(a) Core borrowing continued
Subordinated borrowings
5.5% Sterling subordinated notes 2064
In 2014, Legal & General Group Plc issued \u00a3600m of 5.5% dated subordinated notes. The notes are callable at par on 27 June 2044 and every five years
thereafter. If not called, the coupon from 27 June 2044 will be reset to the prevailing five year benchmark gilt yield plus 3.17% p.a. These notes mature
on 27 June 2064.
5.375% Sterling subordinated notes 2045
In 2015, Legal & General Group Plc issued \u00a3600m of 5.375% dated subordinated notes. The notes are callable at par on 27 October 2025 and every five
years thereafter. If not called, the coupon from 27 October 2025 will be reset to the prevailing five year benchmark gilt yield plus 4.58% p.a. These notes
mature on 27 October 2045.
5.25% US Dollar subordinated notes 2047
On 21 March 2017, Legal & General Group Plc issued $850m of 5.25% dated subordinated notes. The notes are callable at par on 21 March 2027
and every five years thereafter. If not called, the coupon from 21 March 2027 will be reset to the prevailing US Dollar mid-swap rate plus 3.687% p.a.
These notes mature on 21 March 2047.
5.55% US Dollar subordinated notes 2052
On 24 April 2017, Legal & General Group Plc issued $500m of 5.55% dated subordinated notes. The notes are callable at par on 24 April 2032 and every
five years thereafter. If not called, the coupon from 24 April 2032 will be reset to the prevailing US Dollar mid-swap rate plus 4.19% p.a. These notes
mature on 24 April 2052.
5.125% Sterling subordinated notes 2048
On 14 November 2018, Legal & General Group Plc issued \u00a3400m of 5.125% dated subordinated notes. The notes are callable at par on 14 November
2028 and every five years thereafter. If not called, the coupon from 14 November 2028 will be reset to the prevailing five year benchmark gilt yield plus
4.65% p.a. These notes mature on 14 November 2048.
3.75% Sterling subordinated notes 2049
On 26 November 2019, Legal & General Group Plc issued \u00a3600m of 3.75% dated subordinated notes. The notes are callable at par on 26 November 2029
and every five years thereafter. If not called, the coupon from 26 November 2029 will be reset to the prevailing five year benchmark gilt yield plus 4.05%
p.a. These notes mature on 26 November 2049.
4.5% Sterling subordinated notes 2050
On 1 May 2020, Legal & General Group Plc issued \u00a3500m of 4.5% dated subordinated notes. The notes are callable at par on 1 November 2030 and every
five years thereafter. If not called, the coupon from 1 November 2030 will be reset to the prevailing five year benchmark gilt yield plus 5.25% p.a. These
notes mature on 1 November 2050.
All of the above subordinated notes are treated as Tier 2 own funds for Solvency II purposes unless stated otherwise.
Senior borrowings
Between 2000 and 2002 Legal & General Finance Plc issued \u00a3600m of senior unsecured Sterling medium term notes 2031-2041 at coupons between
5.75% and 5.875%. These notes have various maturity dates between 2031 and 2041.
Legal & General Group Plc\u2002Annual Report and Accounts 2022206 Financial statements
Balance sheet management
continued
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(b) Operational borrowings
Carrying Interest Carrying Interest
amount rate Fair value amount rate Fair value
2022 2022 2022 2021 2021 2021
\u00a3m % \u00a3m \u00a3m % \u00a3m
Short-term operational borrowings
Euro Commercial Paper 50 1.60 50 50 0.16 50
Bank loans and overdrafts 3 \u2013 3 \u2013 \u2013 \u2013
Non-recourse borrowings
Cardiff Interchange Limited credit facility 64 5.63 64 45 2.29 45
CALA revolving credit facility 24 5.50 24 100 1.96 100
Class B Surplus Notes 788 6.62 788 664 1.72 664
Affordable Homes revolving credit facility 19 4.38 19 56 2.08 56
Homes Modular revolving credit facility 15 6.62 15 9 3.27 9
Operational borrowings
1
963 \u2013 963 924 \u2013 924
1. Unit linked borrowings with a carrying value of \u00a3256m (31 December 2021: \u00a38m) are excluded from the analysis above as the risk is retained by policyholders. Operational borrowings
including unit linked borrowings are \u00a31,219m (31 December 2021: \u00a3932m).
Non-recourse borrowings
\u2022 Cardiff Interchange Limited\u2019s credit facility is secured on the assets of Cardiff Interchange Limited and Legal & General Capital Investments Limited\u2019s
(LGCIL) shares in, and intercompany debt owed by, Cardiff Interchange Limited.
\u2022 CALA Group (Holdings) Limited\u2019s revolving credit facility is secured by way of a bond and floating charge, and guarantees and fixed charges granted
by CALA Group Limited and its main subsidiaries (CALA 1999 Limited, CALA Limited, and CALA Management Limited). A number of other bonds
and floating charges, fixed securities, debentures and share pledges over land and assets have been granted by certain subsidiaries of CALA Group
Limited in favour of the lenders.
\u2022 The Class B Surplus Notes have been issued by a US subsidiary of the group as part of a coinsurance structure for the purpose of US statutory
regulations. The notes were issued in exchange for bonds of the same value from an unrelated party, included within financial investments on the
group\u2019s Consolidated Balance Sheet.
\u2022 The revolving credit facilities to Affordable Homes is subject to agreed covenants, the breach of which could result in a charge on the land and
work in progress of Legal & General Affordable Homes (Development 2) Limited and Legal & General Affordable Homes (Development 3) Limited.
\u2022 Legal & General Homes Modular Limited\u2019s revolving credit facility is secured by way of fixed charges over development properties owned by the
company and a fixed charge over the shares in the company.
The carrying value of operational borrowings approximates their fair value. The presented fair values reflect observable market information and have
been classified as Level 2 in the fair value hierarchy with the exception of the Affordable Homes revolving credit facility which has been classified as
Level 3.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 207
Strategic report Governance Financial statements Other information
Balance sheet management
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22 Borrowings continued
(iii) Analysis by maturity
Maturity profile of undiscounted cash flows
Carrying Within 1-5 5-15 15-25 Over
amount 1 year years years years 25 years Total
As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Subordinated borrowings
5.5% Sterling subordinated notes 2064 (Tier 2) 590 \u2013 \u2013 \u2013 \u2013 (600) (600)
5.375% Sterling subordinated notes 2045 (Tier 2) 605 (6) \u2013 \u2013 (600) \u2013 (606)
5.25% US Dollar subordinated notes 2047 (Tier 2) 712 (10) \u2013 \u2013 (704) \u2013 (714)
5.55% US Dollar subordinated notes 2052 (Tier 2) 417 (4) \u2013 \u2013 \u2013 (414) (418)
5.125% Sterling subordinated notes 2048 (Tier 2) 400 (3) \u2013 \u2013 \u2013 (400) (403)
3.75% Sterling subordinated notes 2049 (Tier 2) 599 (2) \u2013 \u2013 \u2013 (600) (602)
4.5% Sterling subordinated notes 2050 (Tier 2) 500 (4) \u2013 \u2013 \u2013 (500) (504)
Client fund holdings of group debt (Tier 2) (74) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
Senior borrowings
Sterling medium term notes 2031-2041 609 (11) \u2013 (590) (10) \u2013 (611)
Client fund holdings of group debt (20) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
Total core borrowings 4,338 (40) \u2013 (590) (1,314) (2,514) (4,458)
Short-term operational borrowings
Euro Commercial Paper 50 (50) \u2013 \u2013 \u2013 \u2013 (50)
Bank loans and overdrafts 3 (3) \u2013 \u2013 \u2013 \u2013 (3)
Non-recourse borrowings
Cardiff Interchange Limited credit facility 64 (64) \u2013 \u2013 \u2013 \u2013 (64)
CALA revolving credit facility 24 \u2013 (24) \u2013 \u2013 \u2013 (24)
Class B Surplus Notes 788 \u2013 (47) (422) (319) \u2013 (788)
Affordable Homes revolving credit facility 19 (19) \u2013 \u2013 \u2013 \u2013 (19)
Homes Modular revolving credit facility 15 (1) (14) \u2013 \u2013 \u2013 (15)
Total operational borrowings 963 (137) (85) (422) (319) \u2013 (963)
Total borrowings excluding unit linked borrowings
1
5,301 (177) (85) (1,012) (1,633) (2,514) (5,421)
Contractual undiscounted interest payments (291) (1,150) (2,569) (1,896) (781) (6,687)
Total contractual undiscounted cash flows (468) (1,235) (3,581) (3,529) (3,295) (12,108)
1. Unit linked borrowings are excluded from the analysis above as the risk is retained by policyholders.
Legal & General Group Plc\u2002Annual Report and Accounts 2022208 Financial statements
Balance sheet management
continued
13.2_Financial_statements_v3.indd 20813.2_Financial_statements_v3.indd 208 14/03/2023 20:2114/03/2023 20:21
Maturity profile of undiscounted cash flows
Carrying Within 1-5 5-15 15-25 Over
amount 1 year years years years 25 years Total
As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Subordinated borrowings
5.5% Sterling subordinated notes 2064 (Tier 2) 590 \u2013 \u2013 \u2013 \u2013 (600) (600)
5.375% Sterling subordinated notes 2045 (Tier 2) 604 (6) \u2013 \u2013 (600) \u2013 (606)
5.25% US Dollar subordinated notes 2047 (Tier 2) 635 (9) \u2013 \u2013 \u2013 (628) (637)
5.55% US Dollar subordinated notes 2052 (Tier 2) 373 (4) \u2013 \u2013 \u2013 (370) (374)
5.125% Sterling subordinated notes 2048 (Tier 2) 400 (3) \u2013 \u2013 \u2013 (400) (403)
3.75% Sterling subordinated notes 2049 (Tier 2) 598 (2) \u2013 \u2013 \u2013 (600) (602)
4.5% Sterling subordinated notes 2050 (Tier 2) 500 (4) \u2013 \u2013 \u2013 (500) (504)
Client fund holdings of group debt (Tier 2) (44) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
Senior borrowings
Sterling medium term notes 2031-2041 609 (11) \u2013 (590) (10) \u2013 (611)
Client fund holdings of group debt (9) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
Total core borrowings 4,256 (39) \u2013 (590) (610) (3,098) (4,337)
Short-term operational borrowings
Euro Commercial Paper 50 (50) \u2013 \u2013 \u2013 \u2013 (50)
Bank loans and overdrafts \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013
Non-recourse borrowings
Cardiff Interchange Limited credit facility 45 \u2013 (45) \u2013 \u2013 \u2013 (45)
CALA revolving credit facility 100 (6) (94) \u2013 \u2013 \u2013 (100)
Class B Surplus Notes 664 \u2013 \u2013 (468) (198) \u2013 (666)
Affordable Homes revolving credit facility 56 (56) \u2013 \u2013 \u2013 \u2013 (56)
Homes Modular revolving credit facility 9 \u2013 (9) \u2013 \u2013 \u2013 (9)
Total operational borrowings 924 (112) (148) (468) (198) \u2013 (926)
Total borrowings excluding unit linked borrowings
1
5,180 (151) (148) (1,058) (808) (3,098) (5,263)
Contractual undiscounted interest payments (202) (924) (2,132) (1,840) (889) (5,987)
Total contractual undiscounted cash flows (353) (1,072) (3,190) (2,648) (3,987) (11,250)
1. Unit linked borrowings are excluded from the analysis above as the risk is retained by policyholders.
The maturity profile above is calculated on the basis that a facility to refinance a maturing loan is not recognised unless the facility and loan are related.
If refinancing under the group\u2019s credit facilities was recognised, then all amounts shown as repayable within one year would be reclassified as repayable
between one and five years.
Undiscounted interest payments are estimated based on the year end applicable interest rate and spot exchange rates.
Syndicated credit facility
As at 31 December 2022, the group had in place a \u00a31.5bn (31 December 2021: \u00a31.0bn) syndicated committed revolving credit facility provided by
a number of its key relationship banks, maturing in August 2027. No amounts were outstanding at 31 December 2022.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 209
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22 Borrowings continued
(iv) Movement in borrowings
2022 2021
\u00a3m \u00a3m
As at 1 January 5,188 5,613
Cash movements:
\u2013 Proceeds from borrowings 691 503
\u2013 Repayment of borrowings (737) (798)
\u2013 Net increase/(decrease) in bank loans and overdrafts 254 (54)
Non-cash movements:
\u2013 Amortisation 2 3
\u2013 Foreign exchange rate movements 201 10
\u2013 Other (42) (89)
Core and operational borrowings as at 31 December 5,557 5,188
23 Provisions
Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be
made. Where the group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually certain. The group recognises a provision for onerous contracts when the expected
benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract.
The group operates a number of defined benefit and defined contribution pension schemes in the UK and overseas. The assets of all UK defined
benefit schemes are held in separate trustee administered funds which are subject to regular actuarial valuations every three years, updated by
formal reviews at reporting dates. The actuarial assumptions used in the triennial valuation would normally be consistent or more prudent than
those used for the purposes of IAS 19, \u2018Employee Benefits\u2019 reporting.
The liability recognised in the Consolidated Balance Sheet in respect of the defined benefit pension schemes is the present value of the defined
benefit obligation at the balance sheet date less the fair value of plan assets, provided any surplus in the Fund and Scheme is not restricted. Plan
assets exclude the insurance contracts issued by the group. The defined benefit obligation is calculated actuarially each year using the projected
unit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows. The discount
rate is based on market yields of high quality corporate bonds which are denominated in the currency in which the benefits will be paid, and that
have terms to maturity which approximate to those of the related pension liability.
The group pays contractual contributions in respect of defined contribution schemes. The group has no further payment obligations once the
contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
(i) Analysis of provisions
2022 2021
Notes \u00a3m \u00a3m
Other provisions 23(ii) 273 213
Retirement benefit obligations 23(iii) 617 1,025
Total provisions 890 1,238
Legal & General Group Plc\u2002Annual Report and Accounts 2022210 Financial statements
Balance sheet management
continued
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(ii) Other provisions
Included within Other provisions are amounts relating to new and existing M&A and restructuring transactions. These include costs that Legal & General
Investment Management (LGIM) is committed to incur on the extension of its existing partnership with State Street announced in 2021, to increase
the use of Charles River technology across the front office and to deliver middle office services going forward. Costs include the transfer of data and
operations to State Street, as well as the implementation of the new operating model. The amounts included in the provision have been determined
on a best estimate basis by reference to a range of plausible scenarios, taking into account the multi-year implementation period for the project. As at
31 December 2022, the outstanding provision was \u00a3111m (31 December 2021: \u00a389m).
(iii) Retirement benefit obligations
Defined contribution schemes
The group operates the following principal defined contribution pension schemes in the UK and overseas:
\u2022 Legal & General Group Personal Pension Plan (UK);
\u2022 Legal & General Staff Stakeholder Pension Scheme (UK);
\u2022 Legal & General America Inc. Savings Plan (US); and
\u2022 CALA defined contribution pension scheme.
Contributions of \u00a393m (2021: \u00a382m) were made during the year in respect of defined contribution schemes.
Defined benefit schemes
The group operates the following defined benefit pension schemes in the UK and overseas:
\u2022 Legal & General Group UK Pension and Assurance Fund (the Fund). The Fund was closed to new members from January 1995; the latest triennial
valuation as at 31 December 2021 was completed on 21 September 2022;
\u2022 Legal & General Group UK Senior Pension Scheme (the Scheme). The Scheme was, with a few exceptions (principally transfers from the Fund), closed
to new members from August 2000 and finally closed to new members from April 2007; the latest triennial valuation as at 31 December 2021 was
completed on 21 September 2022;
\u2022 Legal & General America Inc. Cash Balance Plan (US). The last full actuarial valuation was as at 31 December 2022; and
\u2022 CALA Retirement and Death Benefits Scheme (UK). This scheme closed to new members from 31 December 2007 and closed to future accrual on
31 December 2018; the last triennial actuarial valuation was as at 6 April 2021.
The UK defined benefit schemes operate within the UK pensions\u2019 regulatory framework.
Certain of the following disclosures have only been presented in relation to the Fund and Scheme, as they represent the most significant defined benefit
scheme obligations.
The UK Fund and Scheme were closed to future accrual on 31 December 2015. As part of this arrangement, payments to the Fund and Scheme in
respect of future accruals ceased from this date and were replaced with a company contribution payment of between 5% and 15% into a defined
contribution arrangement.
The assets of all UK defined benefit schemes are held in separate trustee administered funds to meet long-term pension obligations to past and present
employees. Trustees are appointed to the schemes and have a responsibility to act in the best interest of the scheme beneficiaries. The trustees\u2019
long-term objectives are to minimise the risk that there are insufficient assets to meet the liabilities of the scheme over the longer term, control the
on-going operational costs of the schemes and to maximise investment returns for the beneficiaries within an acceptable level of risk.
The total number of members of the Fund and Scheme was:
2022 2021
Employed deferreds 73 79
Deferreds 2,557 2,782
Pensioners 3,911 3,791
Total 6,541 6,652
The group works closely with the trustees to develop an investment strategy for each UK scheme in order to meet the long-term objectives of the
trustees as noted above.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 211
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23 Provisions continued
(iii) Retirement benefit obligations continued
Defined benefit schemes continued
Certain parts of the liabilities of the Fund and Scheme are secured by way of annuities purchased from the group. These annuities are not recognised
as an asset for IAS 19 purposes, but at 31 December 2022 the value of these annuities, on an IAS 19 basis, was \u00a3718m (2021: \u00a3990m).
The remainder of the liabilities of the Fund and Scheme are secured by cash or by the way of Assured Payment Policies (APPs), purchased from the
group to match the majority of future expected cash flows of the remaining members of the Fund and Scheme. The APPs are recognised as an asset
for IAS 19 purposes, and their value is included in the table summarising the plan assets. The APPs aim to match the changes in the value of the liabilities
due to changes in economic factors, namely interest rates, credit spreads and inflation. The APPs do not aim to match changes in the value of liabilities
due to the actual mortality experience of members being different from the assumptions made in the valuation basis.
The Fund and Scheme expose the group to a number of risks:
Risk Detail
Uncertainty in benefit payments The value of the group\u2019s liabilities for post-retirement benefits will ultimately depend on the amount of benefits paid
out. This in turn will primarily depend on the level of inflation and how long individuals live.
Volatility in asset values The group is exposed to future movements in the values of assets held in the Fund and Scheme to meet future benefit
payments. The purchase of the APP assets significantly reduces this risk as the value of the APP assets is expected to
move in line with the value of liabilities.
Uncertainty in cash funding Movements in the values of the obligations or assets may result in the group being required to provide higher levels of
cash funding, although changes in the level of cash required can often be spread over a number of years. In addition,
the group is also exposed to adverse changes in pension regulation.
These risks are managed within the risk appetite of the Fund and Scheme. The sensitivity of the net obligations to changes in any of the variables are
monitored and action is taken if any risk moves outside of the appetite.
Full actuarial valuations are carried out for the Fund and Scheme every three years, updated by formal reviews at each anniversary date between.
The actuarial assumptions used in the triennial valuation would normally be more prudent than those used for the purposes of IAS 19 reporting. The
latest triennial valuation as at 31 December 2021 was completed on 21 September 2022. Where the Fund or Scheme are in deficit following the triennial
valuations, the group and the trustee agree a deficit recovery plan. Both the Fund and Scheme have formal deficit recovery plans which aim to eliminate
the deficits over a certain period of time. The triennial valuation as at 31 December 2021 showed a total funding deficit for both the Fund and the
Scheme of \u00a3184m. A recovery plan has been agreed of \u00a398m per annum until 31 December 2024. Payments due under the recovery plan may pause
if the estimated funding level of the schemes suggests the schemes are in surplus. Following a pause, the estimated funding level of the schemes will
continue to be monitored, and payments would be restarted if the estimated funding level reduces back into a deficit. As a consequence, the expected
contribution for 2023 will be determined based on the estimated funding level in 2023.
The Fund and Scheme liabilities have an average duration of 13.9 years (2021: 17.8 years) and 13.2 years (2021: 16.9 years) respectively. The reduction
in the duration is driven by the higher discount rate, as a result of material increases in interest rates over 2022. The expected undiscounted benefit
payments to members of the Fund and Scheme, including pensions in payment secured by annuities purchased from the group, are shown in the
unaudited chart below:
Annuity payments
Pensioner cash flows
Employed deferred and deferred member cash flows
Undiscounted benefit payments
120
100
80
60
40
20
0
Projected benefit payments (\u00a3m)
2023 2033
2043
2053 2063 2073 2083
Legal & General Group Plc\u2002Annual Report and Accounts 2022212 Financial statements
Balance sheet management
continued
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The benefits paid from the defined benefit schemes are based on percentages of the employees\u2019 final pensionable salary for each year of credited
service. The group has no liability for retirement benefits other than for pensions. The Fund and Scheme account for all of the UK and over 90% of
worldwide assets of the group\u2019s defined benefit schemes.
The principal actuarial assumptions for the Fund and Scheme are set out below.
The higher mortality experience observed since 2021 as a result of Covid-19 is considered to be exceptional, and long-term mortality assumptions have
not been revised to reflect this experience.
Fund and Fund and
Scheme Scheme
2022 2021
% %
Rate used to discount liabilities 4.83 1.84
Rate of increase in pensions in payment (pre-2006 service) 3.74 3.79
Rate of increase in deferred pensions (pre-2006 service) 3.89 3.97
Rate of general inflation (RPI) 3.36 3.49
Post retirement mortality 2022 2021
Fund 72.5% PCMA00 / 82.5% PCFA00 72.5% PCMA00 / 82.5% PCFA00
Scheme 67.5% PCMA00 / 77.5% PCFA00 67.5% PCMA00 / 77.5% PCFA00
Mortality Improvements (Fund and Scheme)
1
CMI 2020, base date 2019 CMI 2019, base date 2018
Sk = 7.5 Sk = 7.5
1. Long-term rates of 1.5% for males, 1.0% for females, applying up to age 85, with tapering down to 0% by age 110 (2021: long-term rates of 1.5% for males, 1.0% for females, applying up to
age 85, with tapering down to 0% by age 110).
This equates to average life expectancy as follows:
Fund and Fund and
Scheme Scheme
2022 2021
years years
Normal retirement age 60.0 60.0
Male life expectancy at retirement age 87.0 87.2
Female life expectancy at retirement age 88.1 88.4
Male life expectancy at age 60, for a current 40-year old 89.0 89.3
Female life expectancy at age 60, for a current 40-year old 89.5 89.8
Legal & General Group Plc\u2002Annual Report and Accounts 2022 213
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23 Provisions continued
(iii) Retirement benefit obligations continued
Defined benefit schemes continued
Fund and CALA Homes Fund and CALA Homes
Scheme and Overseas Scheme and Overseas
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Movement in present value of defined benefit obligations
As at 1 January (2,348) (145) (2,615) (153)
Current service cost (3) (4) (2) (4)
Interest expense (42) (3) (32) (3)
Actuarial remeasurement (recognised in the Consolidated Statement of Comprehensive Income)
\u2013 Change in financial assumptions 816 46 194 11
\u2013 Change in demographic assumptions 23 \u2013 (19) \u2013
\u2013 Experience (28) (1) 23 (1)
Benefits paid 102 7 103 6
Exchange differences \u2013 (5) \u2013 (1)
As at 31 December (1,480) (105) (2,348) (145)
Movement in fair value of plan assets
As at 1 January 1,328 140 1,477 126
Expected return on plan assets at liability discount rate 24 3 18 2
Actuarial remeasurement (recognised in the Consolidated Statement of Comprehensive (482) (46) (165) 10
Income)
Employer contributions 100 5 101 8
Benefits paid (102) (7) (103) (6)
Exchange differences \u2013 5 \u2013 \u2013
As at 31 December 868 100 1,328 140
Gross pension obligations included in provisions (612) (5) (1,020) (5)
Annuity obligations insured by LGAS 718 \u2013 990 \u2013
Gross defined benefit pension surplus/(deficit) 106 (5) (30) (5)
Deferred tax on defined benefit pension surplus/(deficit) (27) 1 8 1
Net defined benefit pension surplus/(deficit) 79 (4) (22) (4)
During 2022 annuities were purchased from the group. A premium of \u00a361m (2021: \u00a382m) was paid from the assets of the Fund and Scheme to purchase
these annuities. These annuities are not recognised as an asset for IAS 19 purposes.
2022 has seen significant increases in interest rates. The net defined pension deficit above is not affected by the full extent of the market movement,
because the schemes\u2019 assets are principally APPs, and around half the liabilities are matched through the purchase of annuities from the group. As a
result, interest rate and inflation changes are broadly offset, and liquidity of the schemes is not significantly affected.
The effect of assuming reasonable alternative assumptions in isolation is shown below for the Fund and Scheme combined. The effect is shown on the
defined benefit obligation, net of annuities and the APP assets.
Sensitivities are broadly symmetrical, but larger sensitivities are not necessarily proportionate.
Value of
assets
and
annuities
2022
Net
defined
benefit
pension
surplus/
(deficit)
2022
Value of
assets
and
annuities
2021
Net
defined
benefit
pension
surplus/
(deficit)
2021
Defined
benefit
pension
surplus/
(deficit)
Defined
benefit
pension
surplus/
(deficit)
20212022
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
1 year increase in life expectancy (59) 26 (33) (126) 50 76
0.1% pa decrease in discount rate (20) 20 \u2013 (41) 35 6
1% pa increase in discount rate 176 (177) (1) 356 (307) (49)
0.1% pa increase in RPI and CPI (8) 8 \u2013 (18) 15 3
0.5% pa increase in RPI and CPI (42) 43 1 (91) 74 17
Legal & General Group Plc\u2002Annual Report and Accounts 2022214 Financial statements
Balance sheet management
continued
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The fair value of the plan assets at the end of the year is made up as follows:
Valuation based on
Valuation based on other than
quoted market price quoted market price
Fund and
Scheme
CALA Homes
and Overseas
Fund and
Scheme
CALA Homes
and Overseas
As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
Equities \u2013 30 \u2013 \u2013
Bonds \u2013 13 \u2013 \u2013
Investment funds \u2013 39 \u2013 6
Properties \u2013 \u2013 \u2013 \u2013
Assured Payment Policy
1
\u2013 \u2013 820 \u2013
Cash and cash equivalents 48 12 \u2013 \u2013
Fair value of plan assets 48 94 820 6
Valuation based on
Valuation based on other than
quoted market price quoted market price
Fund and
Scheme
CALA Homes
and Overseas
Fund and
Scheme
CALA Homes
and Overseas
As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m
Equities \u2013 37 \u2013 \u2013
Bonds \u2013 12 \u2013 \u2013
Investment funds \u2013 59 \u2013 \u2013
Properties \u2013 16 \u2013 \u2013
Assured Payment Policy \u2013 \u2013 1,214 \u2013
Cash and cash equivalents 114 16 \u2013 \u2013
Fair value of plan assets 114 140 1,214 \u2013
1. During the year, the Fund and the Scheme undertook APP top-ups under the existing contracts with Legal and General Assurance Society Limited (LGAS), a group company, resulting in a
premium paid by the Fund and the Scheme of \u00a365m and \u00a318m respectively. The plan asset recognised is transferable and therefore has not been eliminated on consolidation within the
group\u2019s financial statements.
The bond assets are all AAA rated as at 31 December 2022 (31 December 2021: AAA rated).
The following amounts have been charged to the income statement:
Fund and
Scheme
CALA Homes
and Overseas
Fund and
Scheme
CALA Homes
and Overseas
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Current service costs 3 4 2 4
Net interest expense 18 \u2013 14 1
Total amounts included in other expenses 21 4 16 5
Legal & General Group Plc\u2002Annual Report and Accounts 2022 215
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Balance sheet management
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24 Payables and other financial liabilities
Derivative liabilities and repurchase agreements are measured at fair value, with changes in fair value recognised in profit or loss.
The fair value of derivative liabilities is derived using broker quotes or models such as option pricing models, simulation models or a combination
of models. The inputs for these models include a range of factors which are deemed to be observable, including current market and contractual
prices for underlying instruments, period to maturity, correlations, yield curves and volatility of the underlying instruments.
Repurchase agreements are valued based on the discounted cash flows expected to be paid, using an observable market interest rate, in line with
the value of the underlying security.
Collateral repayable on short position reverse repurchase agreements and other financial liabilities balances, including FX spots, broker and other
payables, are measured at amortised cost. The carrying value of these liabilities approximates their fair value.
Trail commission represents a liability for the present value of future commission costs on distribution agreements with intermediaries, recognised in
the balance sheet on inception of the contract. At each subsequent reporting date the liability is remeasured, with changes reflected in profit or loss.
2022 2021
\u00a3m \u00a3m
Derivative liabilities 51,190 15,718
Repurchase agreements
1
31,533 46,331
Other financial liabilities
2
12,329 12,215
Total payables and other financial liabilities 95,052 74,264
Due within 12 months 41,064 53,250
Due after 12 months 53,988 21,014
1. Repurchase agreements are presented gross, however they and their related assets (included within debt securities) are subject to master netting arrangements. The significant majority
of repurchase agreements are unit linked.
2. Other financial liabilities include trail commission, lease liabilities, FX spots and the value of short positions taken out to cover reverse repurchase agreements. The value of short positions
as at 31 December 2022 was \u00a34,960m (2021: \u00a35,418m).
Fair value hierarchy
Amortised
Total Level 1 Level 2 Level 3 cost
1
As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Derivative liabilities 51,190 448 50,717 25 \u2013
Repurchase agreements 31,533 \u2013 31,533 \u2013 \u2013
Other financial liabilities 12,329 4,533 644 39 7,113
Total payables and other financial liabilities 95,052 4,981 82,894 64 7,113
Amortised
Total Level 1 Level 2 Level 3 cost
1
As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Derivative liabilities 15,718 331 15,316 71 \u2013
Repurchase agreements 46,331 \u2013 46,331 \u2013 \u2013
Other financial liabilities 12,215 5,438 55 \u2013 6,722
Total payables and other financial liabilities 74,264 5,769 61,702 71 6,722
1. The carrying value of payables and other financial liabilities at amortised cost approximates its fair value.
Significant transfers between levels
There have been no significant transfers of liabilities between Levels 1, 2 and 3 for the year ended 31 December 2022 (2021: no significant transfers).
Legal & General Group Plc\u2002Annual Report and Accounts 2022216 Financial statements
Balance sheet management
continued
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25 Leases
The group leases offices, vehicles, IT equipment and investment properties under non-cancellable operating lease agreements. The group has
elected to make use of the recognition exemptions as permitted in respect of short-term leases (lease contracts with a term of 12 months or less),
and lease contracts for which the underlying asset is of low value. Such leases are not recognised on the Consolidated Balance Sheet but the
group recognises the associated lease payments as an expense over the lease term.
As a lessee, the group recognises leases on the balance sheet as \u2018right-of-use\u2019 assets and lease liabilities. The right-of-use assets are either
classified as property, plant and equipment or investment property.
The right-of-use assets\u2019 value is initially recognised as the calculated value of the lease liabilities, initial direct costs and incentives received. The
right-of use assets are subsequently accounted for in accordance with the cost model in IAS 16, \u2018Property, Plant and Equipment\u2019 or as investment
property under IAS 40, \u2018Investment Property\u2019. The group also assesses right-of-use assets classified as property, plant and equipment for
impairment when such indicators exist.
The initial measurement of the lease liabilities is made up of the present value of lease payments to be made over the lease term, including fixed
lease payments and excluding lease incentive receivables. The group uses the incremental borrowing rate as a discount rate for calculating the
lease liabilities. The lease liabilities are unwound over the term of the lease giving rise to an interest expense. Additionally, the liabilities are reduced
when lease payments are made. The group reassesses the carrying amount of lease liabilities and right-of-use assets if certain events occur that
modify the original assumptions used to calculate the lease balances upon initial recognition.
The table below describes the nature of the group\u2019s leasing activities by type of right-of-use asset recognised on the Consolidated Balance Sheet within
Property, plant and equipment:
1
Office Office
buildings IT Vehicles Total buildings IT Vehicles Total
2022 2022 2022 2022 2021 2021 2021 2021
Carrying amount \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
As at 1 January 157 22 1 180 167 35 3 205
Additions 6 \u2013 \u2013 6 14 \u2013 \u2013 14
Depreciation for the year (25) (13) (1) (39) (23) (13) (2) (38)
Disposals \u2013 (1) \u2013 (1) (1) \u2013 \u2013 (1)
Increase due to currency translation 6 \u2013 \u2013 6 \u2013 \u2013 \u2013 \u2013
Revaluation
2
(4) \u2013 \u2013 (4) \u2013 \u2013 \u2013 \u2013
As at 31 December 140 8 \u2013 148 157 22 1 180
1. Excludes investment property right-of-use assets, which are presented as part of the Investment property disclosure in Note 10.
2. Revaluation relates to an early termination of a building lease.
The maturity profile of lease liabilities is presented in the table below
1
. Lease liabilities are included within Payables and other financial liabilities
(See Note 24).
Undiscounted
lease
payments
Unpaid
finance
charge Present value
Undiscounted
lease
payments
Unpaid
finance
charge Present value
2022 2022 2022 2021 2021 2021
As at 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Within 1 year 37 (8) 29 44 (9) 35
1-2 years 32 (6) 26 35 (7) 28
2-3 years 26 (5) 21 33 (6) 27
3-4 years 25 (4) 21 27 (5) 22
4-5 years 18 (4) 14 26 (4) 22
After 5 years 171 (105) 66 181 (106) 75
Total lease liabilities 309 (132) 177 346 (137) 209
1. Includes investment property lease liability.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 217
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25 Leases continued
Interest expense of \u00a38m (2021: \u00a310m) on lease liabilities is included in finance costs.
The remaining terms on the group\u2019s leases range from 1 to 235 years (2021: 1 to 236 years), with approximately 30% of the leases (2021: 29%) having
extension options and 60% of these leases (2021: 72%) having termination options. Extension and termination options are included in various leases
across the group and are used to maximise operational flexibility in terms of managing the assets used in the group\u2019s operations. The majority of
extension and termination options held are exercisable only by the group and not by the respective lessor.
At 31 December 2022 the group had committed to no additional leases which had not yet commenced (2021: committed to no additional leases).
Income from sub-leasing right-of-use assets is reflected in Rental Income within Investment return (see Note 29).
26 Management of capital resources
Solvency II
The Solvency II financial information in this note is estimated and unaudited.
The group calculates its Solvency II capital requirements using a Partial Internal Model.
The table below shows the group Own Funds, Solvency Capital Requirement (SCR) and Surplus Own Funds, based on the Partial Internal Model,
Matching Adjustment and Transitional Measures on Technical Provisions (TMTP) (recalculated as at 31 December 2022).
The group is required to measure and monitor its capital resources on a regulatory basis and to comply with the minimum capital requirements of
regulators in each territory in which it operates. At a group level, Legal & General has to comply with the requirements established by the Solvency II
Framework Directive, as adopted by the PRA.
As at 31 December 2022, and on the above basis, the group had a surplus of \u00a39,915m (31 December 2021: \u00a38,185m) over its Solvency Capital
Requirement, corresponding to a Solvency II capital coverage ratio of 236% (31 December 2021: 187%). The Solvency II capital position is as follows:
2022 2021
\u00a3m \u00a3m
Unrestricted Tier 1 Own Funds 13,393 13,254
Restricted Tier 1 Own Funds
1
495 495
Tier 2 Subordinated liabilities 3,448 3,995
Eligibility restrictions (110) (183)
Solvency II Own Funds
2,3
17, 226 17,561
Solvency Capital Requirement (7, 311) (9,376)
Solvency II surplus 9,915 8,185
SCR Coverage ratio 236% 187%
1. Restricted Tier 1 Own Funds represent Perpetual restricted Tier 1 contingent convertible notes.
2. Solvency II Own Funds do not include an accrual for the final dividend of \u00a3829m (31 December 2021: \u00a3790m) declared after the balance sheet date.
3. Solvency II Own Funds allow for a Risk Margin of \u00a32,753m (2021: \u00a35,488m) and TMTP of \u00a32,136m (2021: \u00a34,736m).
A reconciliation of the group\u2019s IFRS shareholders\u2019 equity to Solvency II Own Funds is given below:
2022 2021
\u00a3m \u00a3m
IFRS equity
1
12,168 10,981
Remove DAC, goodwill and other intangible assets and associated liabilities (502) (406)
Add IFRS carrying value of subordinated borrowings
2
3,823 3,700
Insurance contract valuation differences
3
2,518 4,132
Difference in value of net deferred tax liabilities (608) (716)
Other (63) 53
Eligibility restrictions (110) (183)
Solvency II Own Funds
4
17, 226 17,561
1. IFRS equity represents equity attributable to owners of the parent and restricted Tier 1 convertible notes as per the Consolidated Balance Sheet.
2. Treated as available capital on the Solvency II balance sheet as the liabilities are subordinate to policyholder claims.
3. Differences in the measurement of technical provisions between IFRS and Solvency II.
4. Solvency II Own Funds do not include an accrual for the final dividend of \u00a3829m (31 December 2021: \u00a3790m) declared after the balance sheet date.
Legal & General Group Plc\u2002Annual Report and Accounts 2022218 Financial statements
Balance sheet management
continued
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Capital management policies and objectives The group aims to manage its capital resources to maintain financial strength, policyholder security and relative external ratings advantage. The group also seeks to maximise its financial flexibility by maintaining strong liquidity and by utilising a range of alternative sources of capital including equity, senior debt, subordinated debt and reinsurance. Capital measures The group measures its capital on a number of different bases, including those which comply with the regulatory frameworks within which the group operates and those which the directors consider most appropriate for managing the business. The measures used by the group include: Accounting and Economic bases Management use financial information prepared on both an IFRS and Economic Capital basis to manage capital and cash flow usage and to determine dividend paying capacity. Regulatory bases The financial strength of the group\u2019s insurance subsidiaries is measured under various local regulatory requirements (see below). Basis of regulatory capital and corresponding regulatory capital requirements In each country in which the group operates, the local insurance regulator specifies rules and guidance for the minimum amount and type of capital which must be held by insurance subsidiaries in excess of their insurance liabilities. The minimum capital requirements have been maintained at all times throughout the year. This helps to ensure that payments to policyholders can be made as they fall due. The required capital is calculated by either assessing the additional assets which would be required to meet the insurance company\u2019s liabilities in specified, stressed financial conditions, or by applying fixed percentages to the insurance company\u2019s liabilities and risk exposures. The requirements in the different jurisdictions in which the group operates are detailed below: Group regulatory basis The group is required to comply with the Solvency II capital requirements calculated using the group\u2019s Partial Internal Model. The vast majority of the risk to which the group is exposed is assessed on the Internal Model basis approved by the PRA. The group capital requirements for a handful of smaller entities are assessed using the Standard Formula basis on materiality grounds. The group\u2019s capital requirements in respect of its US insurance businesses are valued on a local statutory basis and Legal & General Reinsurance Company No. 2 and Legal & General America Reinsurance Limited are valued on a Bermudan statutory basis, following PRA approval of the group\u2019s application to use the Deduction and Aggregation method to include these businesses in the group solvency calculation. UK regulatory basis At the balance sheet date, required capital for the life business was based on the Solvency II Framework Directive, as adopted by the PRA. All material EEA insurance firms, including Legal and General Assurance Society Limited, and Legal and General Assurance (Pensions Management) Limited (LGIM\u2019s insurance subsidiary) are required to hold eligible own funds in excess of their Solvency Capital Requirement, calculated on a Partial Internal Model basis. These firms, as well as the non-EEA insurance firm (Legal & General Reinsurance Company Limited, based in Bermuda) contribute over 90% of the group\u2019s SCR. US regulatory basis Required capital is determined to be the Company Action Level Risk Based Capital (RBC) based on the National Association of Insurance Commissioners RBC model. RBC is a method of measuring the minimum amount of capital appropriate for an insurance company to support its overall business operations, taking into account its size and risk profile. The calculation is based on applying factors to various asset, premium, claims, expense and reserve items, with higher factors used for those items with greater underlying risk and lower factors for less risky items. Bermudan regulatory basis Bermudan regulated insurers are required to hold sufficient capital to meet the Bermudan Solvency Capital Requirement (BSCR). The BSCR model follows a standard formula framework; capital attributed to each risk is calculated by applying specified stresses to the assets and liabilities. The individual risk elements (excluding operational risk) are combined using a covariance matrix and then added to an operational risk charge. 27 Acquisitions During 2022, the group made the following acquisition: \u2022 On 25 May 2022 Legal & General Capital (LGC) entered into a 50:50 partnership with US based real estate developer Ancora to create a real estate platform dedicated to driving life science, research and technology growth across the US. As part of the transaction, the group transferred consideration of $4m (\u00a33m) in cash, in return for a 50% shareholding in Ancora L&G LLC (Ancora L&G). Following the transaction, in accordance with the requirements of IFRS 3 \u2018Business Combinations\u2019, the group now controls Ancora L&G, and therefore the assets and liabilities acquired, and the financial results, have been included in the consolidated financial statements, using the group\u2019s accounting policies. Goodwill of \u00a33m has been recognised on consolidation . Legal & General Group Plc\u2002Annual Report and Accounts 2022 219 Strategic report Governance Financial statements Other information Balance sheet management 13.2_Financial_statements_v3.indd 21913.2_Financial_statements_v3.indd 219 14/03/2023 20:2114/03/2023 20:21
28 Segmental analysis
The group provides a segmental analysis to enhance the understanding of the financial statements.
Under the requirements of IFRS 8, \u2018Operating segments\u2019, 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.
In 2021, the group operated five core businesses across four reportable segments that are continuing operations, with Legal & General Retirement Retail
(LGRR) and Legal & General Retirement Institutional (LGRI) combined into a single segment for reporting purposes, being Legal & General Retirement.
From 1 January 2022, the group announced changes to the business unit responsibilities within the Executive Committee. Andrew Kail became the
Chief Executive Officer of LGRI, succeeding Laura Mason who had previously moved to become CEO of Legal & General Capital (LGC). Our two retail
businesses, LGRR and LGI, came together under the leadership of Bernie Hickman. Reportable segments have therefore been aligned to the group\u2019s five
core businesses. Group expenses and debt costs continue to be reported separately. Transactions between segments are on normal commercial terms,
and are included within the reported segments. To enable comparison, segmental information for the prior year has been restated accordingly.
In the UK, annuity liabilities relating to LGRI and Retail Retirement are backed by a single portfolio of assets, and once a transaction has been completed
the assets relating to any particular transaction are not tracked to the related liabilities. Investment variance is allocated to the two business segments
based on the relative average size of the underlying insurance contract liabilities across the year.
Reporting of assets and liabilities by reportable segment has not been included, as this is not information that is provided to key decision makers on a
regular basis. The group\u2019s asset and liabilities are managed on a legal entity rather than reportable segment basis, in line with regulatory requirements.
Financial information on the reportable segments is further broken down where relevant in order to better explain the drivers of the group\u2019s results.
(i) Profit/(loss) for the year
Group
expenses
Retail and debt
LGRI
1
LGC LGIM Retirement
1
Insurance costs Total
For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Adjusted operating profit/(loss) 1,257 509 340 484 341 (408) 2,523
Investment and other variances (21) (408) (81) (24) 841 (170) 137
Losses attributable to non-controlling interests \u2013 \u2013 \u2013 \u2013 \u2013 (1) (1)
Profit/(loss) before tax attributable to equity holders 1,236 101 259 460 1,182 (579) 2,659
Tax (expense)/credit attributable to equity holders (155) (30) (30) (41) (247) 134 (369)
Profit/(loss) for the year 1,081 71 229 419 935 (445) 2,290
Group
expenses
Retail and debt
LGRI
1
LGC LGIM Retirement
1
Insurance costs Total
For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Adjusted operating profit/(loss) 1,154 461 422 352 268 (395) 2,262
Investment and other variances 193 19 (11) 49 111 (128) 233
Losses attributable to non-controlling interests \u2013 \u2013 \u2013 \u2013 \u2013 (7) (7)
Profit/(loss) before tax attributable to equity holders 1,347 480 411 401 379 (530) 2,488
Tax (expense)/credit attributable to equity holders (213) (93) (79) (63) (59) 62 (445)
Profit/(loss) for the year 1,134 387 332 338 320 (468) 2,043
1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core
businesses. Prior year comparatives have been restated to reflect this change in segmentation.
Additional financial information
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13.2_Financial_statements_v3.indd 22013.2_Financial_statements_v3.indd 220 14/03/2023 20:2114/03/2023 20:21
(ii) Revenue
Revenue comprises of the following:
Net premiums earned
Revenue from insurance and investment contracts has been described in section (e) of this Note.
Investment return
Investment return has been described in Note 29 of this report.
Fees from fund management and investment contracts*
The group generates revenue from acting as the investment manager for clients. Fees charged on investment management services are based on
the contractual fee arrangements applied to assets under management and recognised as revenue as the services are provided.
The group\u2019s income from investment contracts is primarily derived from fees for administration and managing of funds in pension plans. Revenue
generated on investment contracts is recognised as services are provided. No significant judgements are applied on the timing or transaction
price. In the instances of performance fees where revenue is subject to meeting a certain performance threshold, such revenue is not recognised
until the condition has been met, and it is highly probable that no significant reversal of amounts would occur. Variable costs directly related to
securing new contracts are capitalised and amortised over the estimated period over which the revenue is earned.
Transaction fees are charged to implement trades for clients. Such fees are charged at the time the transaction takes place and are based on the
size of the underlying contract.
House building*
House building revenue arises from the sale of residential properties and land, and is recognised net of discounts and sales incentives. Sales of
private houses are recognised on legal completion. Following the implementation of IFRS 15, \u2018Revenue from Contracts with Customers\u2019, the sale
proceeds of part exchange properties are also included in revenue. Sales of social housing, where multiple units are developed and sold under a
contractual agreement with a single customer, typically a housing association, are recognised over time in accordance with construction progress.
Sales of land and commercial property are recognised on unconditional exchange, namely when contracts are exchanged or missives concluded
and, where appropriate, construction is complete. The transaction price is determined using extensive research and expert judgement, current
market values and regional variations.
Warranties are provided on all properties and range from 2-10 years. Due to their features, these do not represent separate performance
obligations.
Professional services fees*
The group\u2019s professional services fees revenue arises from professional services provided by employed surveyors and third party providers, panel
management fees and administration fees. These fees are based on fee scales or contracts. Revenue is recognised when the service has been
rendered.
In addition, the group derives professional fees from facilitation of mortgage arrangements and related products such as conveyancing. These are
based on an agreement/contract and could be tiered based on volume. The obligation in such instances is satisfied on completion of the
mortgage/service, at which point the revenue is recognised. There is no significant judgement applied on the timing or amount of fee recognised.
Insurance broker*
Fees are charged on each performance obligation offered to the customer as per agreed structure. Revenue for placement services is recognised
at the point in time when the intermediary has satisfied its performance obligation, that is when the terms of the insurance policy have been agreed
contractually by the insurer and policyholder, and the insurer has a present right to payment from the policyholder. No significant judgements are
applied on the timing or transaction price.
* Contracts are either expected to last one year or less or reflect the right to consideration from a customer in an amount that corresponds directly with the value of the performance
completed to date. As permitted under IFRS 15, the transaction price allocated to any unsatisfied contracts is not disclosed.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 221
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 22113.2_Financial_statements_v3.indd 221 14/03/2023 20:2114/03/2023 20:21
28 Segmental analysis continued
(ii) Revenue continued
(a) Total revenue
2022 2021
Note \u00a3m \u00a3m
Total income
1
(89,294) 45,450
Adjusted for:
Share of profit from associates and joint ventures, net of tax 43 (47) (25)
Gains on disposal of subsidiaries, associates and joint ventures, and other operations (7) (149)
Total revenue (89,348) 45,276
1. Total income includes investment return losses of \u00a3100,365m (2021: gains of \u00a335,927m).
(b) Total income
Retail LGC and
LGRI
1
LGIM
2,3
Retirement
1
Insurance other
4
Total
For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Internal income \u2013 178 \u2013 \u2013 (178) \u2013
External income (9,874) (78,636) (4,017) 1,371 1,862 (89,294)
Total income (9,874) (78,458) (4,017) 1,371 1,684 (89,294)
Retail LGC and
LGRI
1
LGIM
2,3
Retirement
1
Insurance other
4
Total
For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Internal income \u2013 179 \u2013 \u2013 (179) \u2013
External income 4,842 35,738 1,117 2,029 1,724 45,450
Total income 4,842 35,917 1,117 2,029 1,545 45,450
1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core
businesses. Prior year comparatives have been restated to reflect this change in segmentation.
2. LGIM internal income relates to investment management services provided to other segments.
3. LGIM external income primarily includes fees from fund management and investment returns on unit linked funds.
4. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.
(c) Fees from fund management and investment contracts
Retail LGC and
LGIM Retirement
1
other
2
Total
For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
Investment contracts \u2013 98 \u2013 98
Investment management fees 953 \u2013 (178) 775
Transaction fees 26 \u2013 \u2013 26
Total fees from fund management and investment contracts
3
979 98 (178) 899
Retail LGC and
LGIM Retirement
1
other
2
Total
For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m
Investment contracts \u2013 97 \u2013 97
Investment management fees 1,009 \u2013 (179) 830
Transaction fees 32 \u2013 \u2013 32
Total fees from fund management and investment contracts
3
1,041 97 (179) 959
1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core
businesses. Prior year comparatives have been restated to reflect this change in segmentation.
2. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments.
3. Fees from fund management and investment contracts are a component of Total revenue disclosed in Note 28 (ii)(a).
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022222 Financial statements
13.2_Financial_statements_v3.indd 22213.2_Financial_statements_v3.indd 222 14/03/2023 20:2114/03/2023 20:21
(d) Other operational income from contracts with customers
Retail LGC and
Retirement
1
Insurance other Total
For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
House building \u2013 \u2013 1,429 1,429
Professional services fees 7 78 23 108
Insurance broker \u2013 47 \u2013 47
Total other operational income from contracts with customers
2
7 125 1,452 1,584
Retail LGC and
Retirement
1
Insurance other Total
For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m
House building \u2013 \u2013 1,314 1,314
Professional services fees 5 89 \u2013 94
Insurance broker \u2013 11 \u2013 11
Total other operational income from contracts with customers
2
5 100 1,314 1,419
1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core
businesses. Prior year comparatives have been restated to reflect this change in segmentation.
2. Total other operational income from contracts with customers is a component of Total revenue disclosed in Note 28 (ii)(a) and excludes the share of profit/loss from associates and joint
ventures, and the gain on disposal of subsidiaries, associates and joint ventures.
(e) Gross written premiums on insurance contracts
Gross written premium represents the total premiums 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 income, but are included in the balance sheet investment contract liability.
Outward reinsurance premiums are accounted for in the same accounting period as the related premiums for the direct or inwards reinsurance
business being reinsured.
Retail
LGRI
1
Retirement
1
Insurance
2
Total
For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
Gross written premiums 9,658 781 3,252 13,691
Retail
LGRI
1
Retirement
1
Insurance
2
Total
For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m
Gross written premiums 6,551 813 3,011 10,375
1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core
businesses. Prior year comparatives have been restated to reflect this change in segmentation.
2. Includes \u00a3118m (2021: \u00a3109m) of gross written premiums relating to a residual reinsurance treaty following the disposal of the General Insurance business in 2019.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 223
Strategic report Governance Financial statements Other information
Additional financial information
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29 Investment return Investment return includes fair value gains and losses, excluding fair value movements attributable to available-for-sale (AFS) investments, dividends, rent and interest. Dividends are accrued on an ex-dividend basis. Interest and rent are included on an accruals basis. Interest income for financial assets which are not classified as fair value through profit or loss (FVTPL) is recognised using the effective interest method. The group earns an investment return from holdings in financial instruments and property investments, held to either back insurance and investment contracts on behalf of policyholders or to deliver returns on group capital. 2022 2021 \u00a3m \u00a3m Dividend income 4,521 4,437 Interest income on financial investments at fair value through profit or loss 5,613 4,837 Other investment (expense)/income 1 (1,516) 219 (Losses)/gains on financial investments designated at fair value through profit or loss (102,333) 25,066 Losses on derivative instruments designated as held for trading (5,357) (30) Realised losses on financial assets designated as available-for-sale \u2013 (1) Financial investment return (99,072) 34,528 Rental income 422 375 Net fair value (losses)/gains on properties (1,715) 1,024 Property investment return (1,293) 1,399 Total investment return (100,365) 35,927 1. Other investment (expense)/income primarily comprises interest, gains and losses from other financial instruments, as well as loans and receivables, including those held at amortised cost. \u00a325m (2021: \u00a311m) of Other investment income is from financial investments designated as available-for-sale. There was no impairment on assets classified as available-for-sale during the year . Additional financial information continued Legal & General Group Plc\u2002Annual Report and Accounts 2022224 Financial statements 13.2_Financial_statements_v3.indd 22413.2_Financial_statements_v3.indd 224 14/03/2023 20:2114/03/2023 20:21
30 Tax
The tax shown in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income comprises current and deferred tax.
Current tax
Current tax comprises tax payable on current year profits, adjusted for non-tax deductible or non-taxable items, and any adjustments to tax
payable in respect of previous periods. Current tax is recognised in the Consolidated Income Statement unless it relates to items which are
recognised in the Consolidated Statement of Comprehensive Income or directly in equity.
Deferred tax
Deferred tax is calculated on differences between the accounting value of assets and liabilities and their respective tax values. Deferred tax is also
recognised in respect of unused tax losses to the extent it is probable that future taxable profits will arise against which the losses can be utilised.
Deferred tax is charged or credited to the Consolidated Income Statement, except when it relates to items charged or credited to the Consolidated
Statement of Comprehensive Income or charged or credited directly in equity.
Tax attributable to policyholders and equity holders
The total tax expense shown in the group\u2019s Consolidated Income Statement includes income tax borne by both policyholders and equity holders.
This has been split between tax attributable to policyholders\u2019 returns and equity holders\u2019 profits. Policyholder tax comprises the tax suffered on
policyholder investment returns, while equity holder tax is corporation tax charged on equity holder profit. The separate presentation is intended
to provide more relevant information about the tax that the group pays on the profits that it makes.
Use of estimates
Tax balances include the use of estimates and assumptions which affect items reported in the Consolidated Balance Sheet and Consolidated
Income Statement. Although these estimates are based on management\u2019s best knowledge of current circumstances and future events and
actions, actual results may differ from those estimates.
For tax this includes the determination of assets and liabilities recognised in respect of uncertain tax positions and the estimation of future taxable
income supporting deferred tax asset recognition.
As the group operates internationally, it is exposed to uncertain tax positions and changes in legislation in the jurisdictions in which it operates.
The assessment of uncertain tax positions is subjective and significant management judgement is required. This judgement is based on
interpretation of legislation, management experience and professional advice. The directors have assessed the group\u2019s uncertain tax positions
and are comfortable that the provisions in place are not material individually or in aggregate, and that a reasonable possible alternative outcome
in the next financial year would not have a material impact to the results of the group.
Tax rates
The table below provides a summary of the standard corporate income tax rates of the main territories we operate in.
2022 2021
UK 19.0% 19.0%
USA 21.0% 21.0%
Bermuda 0.0% 0.0%
Ireland 12.5% 12.5%
Global minimum tax regime
The Organisation for Economic Co-operation and Development (OECD) released a framework in December 2021 to address concerns at a global
level about tax contributions of large multinational corporations, with subsequent guidance issued in 2022 and early 2023. This reflects agreement
from over 135 jurisdictions to introduce a global minimum tax rate of 15%. The UK has published draft legislation to implement the OECD
framework and apply a top-up tax to profits that are otherwise taxed at less than 15%. As at 31 December 2022 this legislation has not yet been
substantively enacted.
Under the proposed rules, the group is expected to be liable to top-up tax from 1 January 2024 on profits arising in territories with low tax rates.
The group\u2019s liability to top-up tax will depend on the details of the legislation when it is enacted. The group are closely monitoring the progress
of the framework and draft legislation in the UK and other territories in which the group operates.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 225
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 22513.2_Financial_statements_v3.indd 225 14/03/2023 20:2114/03/2023 20:21
30 Tax continued
(i) Tax expense in the Consolidated Income Statement
2022 2021
\u00a3m \u00a3m
Current tax 446 531
Deferred tax
\u2013 Origination or reversal of temporary differences in the year 36 (24)
\u2013 Impact of revaluation of deferred tax balances (21) 58
Total deferred tax 15 34
Adjustment to equity holders\u2019 tax in respect of prior years (21) 24
Total tax expense 440 589
Less: tax attributable to policyholder returns (71) (144)
Total tax expense attributable to equity holders 369 445
The tax expense attributable to equity holders differs from the tax calculated on profit before tax at the standard UK corporation tax rate as follows:
2022 2021
\u00a3m \u00a3m
Profit before tax attributable to equity holders 2,659 2,488
Tax calculated at 19.00% 505 473
Adjusted for the effects of:
Recurring reconciling items:
(Lower)/higher rate of tax on profits taxed overseas
1
(84) (104)
Income not subject to tax (3) \u2013
Non-deductible expenses (1) 6
Differences between taxable and accounting investment gains (9) (13)
Other taxes on property and foreign income 6 \u2013
Unrecognised tax losses 17 1
Double tax relief
2
(20) \u2013
Non-recurring reconciling items:
Adjustments in respect of prior years
3
(21) 24
Impact of the revaluation of deferred tax balances
4
(21) 58
Tax expense/(credit) attributable to equity holders 369 445
Equity holders\u2019 effective tax rate 13.9% 17.9 %
1. The lower rate of tax on overseas profits is principally driven by the 0% rate of taxation arising in our Bermudan reinsurance company, which provides the group with regulatory capital
flexibility for both our PRT business and our US term insurance business. This also includes the impact of our US operations which are taxed at 21%.
2. Double tax relief represents a UK tax credit available for overseas withholding tax suffered on dividend income.
3. Adjustments in respect of prior years relate to revisions of prior estimates.
4. The Finance Act 2021 increased the rate of corporation tax from 19% to 25% from 1 April 2023. The prevailing rate of UK corporation tax for the year remained at 19%. The future enacted
tax rate of 25% has been used in the calculation of UK deferred tax assets and liabilities, as the rate of corporation tax that is expected to apply when the majority of those deferred tax
balances reverse.
The UK standard rate of corporation tax is used in the above reconciliation as a significant proportion of the group\u2019s profits are earned and are taxable in
the UK, which is also the main domicile for the group.
Additional financial information
continued
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(ii) Deferred tax \u2013 Consolidated Balance Sheet
Deferred tax assets and liabilities have been recognised/(provided) for temporary differences and unused tax losses. The recognition of deferred tax
assets in respect of temporary differences and tax losses are supported by management\u2019s best estimate of future taxable profits to absorb the losses
in future years. Deferred tax assets and liabilities presented on the Consolidated Balance Sheet have been offset to the extent it is permissible under
the relevant accounting standards. The net movement in deferred tax assets and liabilities during the year is as follows:
Tax Tax
Net tax (charged)/ (charged)/ Net tax
liability as at credited to credited Acquisitions/ liability as at
1 January the income to OCI disposals/ 31 December
2022 statement or equity transfers
1
2022
Deferred tax (liabilities)/assets \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Deferred acquisition expenses
2
95 9 12 \u2013 116
Difference between the tax and accounting value of insurance contracts (695) (383) (23) 115 (986)
\u2013 UK (269) 97 37 3 (132)
\u2013 Overseas (426) (480) (60) 112 (854)
Realised and unrealised gains on investments (83) 233 (3) (3) 144
Excess of depreciation over capital allowances 22 (1) \u2013 \u2013 21
Accounting provisions and other 55 76 (1) (108) 22
Trading losses
3
348 72 43 \u2013 463
Pension fund deficit 9 (15) (19) (1) (26)
Acquired intangibles \u2013 1 \u2013 (3) (2)
Net deferred tax (liabilities)/assets (249) (8) 9 \u2013 (248)
Presented on the Consolidated Balance Sheet as:
\u2013 Deferred tax assets
4
2 (2) \u2013 180 180
\u2013 Deferred tax liabilities (251) (6) 9 (180) (428)
Net deferred tax (liabilities)/assets (249) (8) 9 \u2013 (248)
1. The movements through Acquisitions/disposals/transfers during the year reflect reclassifications only. The majority of these reclassifications relate to US deferred tax liabilities and net to
\u00a3nil.
2. Deferred tax assets arising on deferred acquisition expenses relates solely to US balances as at 31 December 2022.
3. Trading losses consist solely of US operating losses (2021: \u00a3346m). The losses are not time restricted, and we expect to recover them over a period of 15 to 20 years, commensurate with
the lifecycle of the underlying insurance contracts. In reaching this conclusion, we have considered past results, the different basis under which US companies are taxed, temporary
differences that are expected to generate future profits against which the deferred tax can be offset, management actions, and future profit forecasts. The recoverability of deferred tax
assets is routinely reviewed by management.
4. The deferred tax asset represents \u00a3168m of US unrealised losses on investments (2021: \u00a3nil), \u00a37m of UK unrealised losses on investments (2021: \u00a3nil) and \u00a35m of other US deferred tax
assets (2021: \u00a3nil). These are not capable of being offset against any deferred tax liabilities or future trading profits.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 227
Strategic report Governance Financial statements Other information
Additional financial information
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30 Tax continued
(ii) Deferred tax \u2013 Consolidated Balance Sheet continued
Net tax
liability as at
1 January
2021
\u00a3m
Tax
(charged)/
credited to
the income
statement
\u00a3m
Tax
(charged)/
credited
to OCI
or equity
\u00a3m
Acquisitions/
disposals/
transfers
1
\u00a3m
Net tax
liability as at
31 December
2021
\u00a3mDeferred tax (liabilities)/assets
Deferred acquisition expenses
2
85 10 \u2013 \u2013 95
Difference between the tax and accounting value of insurance contracts (557) (135) (3) \u2013 (695)
\u2013 UK (207) (58) (4) \u2013 (269)
\u2013 Overseas (350) (77) 1 \u2013 (426)
Realised and unrealised gains on investments
1
(113) 23 \u2013 7 (83)
Excess of depreciation over capital allowances 18 5 \u2013 (1) 22
Excess expenses 1 (1) \u2013 \u2013 \u2013
Accounting provisions and other
1
54 1 \u2013 \u2013 55
Trading losses
3
289 60 \u2013 (1) 348
Pension fund deficit 22 (6) (7) \u2013 9
Acquired intangibles (1) 1 \u2013 \u2013 \u2013
Total net deferred tax (liabilities)/assets (202) (42) (10) 5 (249)
Less: net deferred tax liabilities transferred on disposal
4
\u2013 5 \u2013 (5) \u2013
Net deferred tax (liabilities)/assets (202) (37) (10) \u2013 (249)
Presented on the Consolidated Balance Sheet as:
\u2013 Deferred tax assets
5
5 (3) \u2013 \u2013 2
\u2013 Deferred tax liabilities (207) (34) (10) \u2013 (251)
Net deferred tax (liabilities)/assets (202) (37) (10) \u2013 (249)
1. The US deferred tax liability of \u00a3102m in respect of US bond contracts has been reclassified from Accounting provisions and other to Realised and unrealised gains on investments. The net
impact on the total balance is \u00a3nil.
2. Deferred tax liabilities arising on deferred acquisition expenses relates solely to US balances as at 31 December 2021.
3. Trading losses include deferred tax on UK trade and US operating losses of \u00a32m (2020: \u00a35m) and \u00a3346m (2020: \u00a3284m) respectively. Overseas net deferred tax liabilities include a deferred
tax asset of \u00a3346m (2020: \u00a3284m) on accumulated losses in our US insurance business. These losses are not time restricted, and we expect to recover them over a period of 15 to 20
years, commensurate with the lifecycle of the underlying insurance contracts. In reaching this conclusion, we have considered past results, the different basis under which US companies
are taxed, temporary differences that are expected to generate future profits against which the deferred tax can be offset, management actions, and future profit forecasts. The
recoverability of deferred tax assets is routinely reviewed by management.
4. Deferred tax assets and liabilities transferred on disposal relate to the deconsolidation of a number of subsidiaries following the Inspired Villages Group joint venture agreement with
Natwest Group Pension Trustee Limited in August 2021.
5. The deferred tax asset recognised separately in the Consolidated Balance Sheet refers to deferred tax assets against which there are no appropriate deferred tax liabilities to offset the
asset. The closing amount of \u00a32m (2020: \u00a35m) are restricted losses which cannot be offset against profits arising elsewhere in the group.
Unrecognised deferred tax assets
The group has the following unrelieved tax losses and deductible temporary differences carried forward as at 31 December 2022. No deferred tax asset
has been recognised in respect of these as at 31 December 2022 (or 31 December 2021), as it is not probable that there will be suitable taxable profits
emerging in future periods against which to relieve them. These tax assets will only be recognised if it becomes probable that suitable taxable profits will
arise in future periods.
Gross Tax Gross Tax
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Trading losses
1
272 61 172 36
Capital losses
2
67 14 74 19
Excess management expense 9 2 9 2
Unrelieved interest payments on debt instruments 14 4 14 4
Unrecognised deferred tax assets 362 81 269 61
1. Gross trading losses includes \u00a3163m of UK trading losses (2021: \u00a361m), \u00a357m (2021: \u00a314m) related to the US business which are expected to expire between 2026 and 2032 and \u00a352m
(2021: \u00a347m) related to other overseas jurisdictions.
2. Gross capital losses includes \u00a364m (2021: \u00a3nil) related to the US business.
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022228 Financial statements
13.2_Financial_statements_v3.indd 22813.2_Financial_statements_v3.indd 228 14/03/2023 20:2114/03/2023 20:21
(iii) Current tax \u2013 Consolidated Balance Sheet
2022 2021
\u00a3m \u00a3m
Tax recoverable within 12 months 52 46
Tax recoverable after 12 months 750 624
Current tax assets
1
802 670
1. Of the total current tax asset \u00a3745m (2021: \u00a3619m) relates to amount recoverable in respect of withholding tax reclaims attributable to funds.
2022 2021
\u00a3m \u00a3m
Tax due within 12 months 1 4
Tax due after 12 months 68 80
Current tax liabilities 69 84
(iv) Tax charged directly in equity
2022 2021
\u00a3m \u00a3m
Current tax (6) 4
Deferred tax (7) (3)
Tax (credit)/charge recognised directly in equity (13) 1
31 Auditor\u2019s remuneration
2022 2021
\u00a3m \u00a3m
Remuneration receivable by the company\u2019s auditors for the audit of the consolidated and company financial statements 3.0 1.5
Remuneration receivable by the company\u2019s auditors and its associates for the supply of other services to the company and its associates,
including remuneration for the audit of the financial statements of the company\u2019s subsidiaries:
The audit of the company\u2019s subsidiaries 11.2 7.8
Audit related assurance services \u2013 required by national or EU legislation 1.6 1.3
Audit related assurance services \u2013 other 0.9 1.2
Other assurance services 0.8 0.1
Total remuneration 17.5 11.9
32 Employee information
2022 2021
Monthly average number of staff employed during the year:
UK 10,333 9,705
USA 1,032 927
Europe 59 43
Other 74 66
Worldwide employees 11,498 10,741
2022 2021
Notes \u00a3m \u00a3m
Wages and salaries 917 789
Social security costs 105 89
Share-based incentive awards 33 54 33
Defined benefit pension costs 23 25 21
Defined contribution pension costs 23 93 82
Total employee related expenses 1,194 1,014
Legal & General Group Plc\u2002Annual Report and Accounts 2022 229
Strategic report Governance Financial statements Other information
Additional financial information
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33 Share-based payments
The fair value at the date of grant of the equity instrument is recognised as an expense, spread over the vesting period of the instrument. The total
amount to be expensed is determined by reference to the fair value of the awards, excluding the impact of any non-market vesting conditions.
At each balance sheet date, the group revises its estimate of the number of equity instruments which are expected to become exercisable. It
recognises the impact of the revision of original estimates, if any, in the income statement and a corresponding adjustment is made to equity.
On vesting or exercise, the difference between the expense charged to the income statement and the actual cost to the group is transferred to
retained earnings. Where new shares are issued, the proceeds received are credited to share capital and share premium.
(i) Description of plans
The group provides a number of equity settled share-based long-term incentive plans for directors and eligible employees.
Nil Cost Options can be granted to senior managers under the Performance Share Plan (PSP), based upon individual and company performance. From
2014, the number of options that vest are equally dependent on the group\u2019s relative TSR and Earnings per Share (EPS)/Dividend per Share (DPS) growth.
The awards vest after the end of the three year performance period and become exercisable in thirds over three, four and five years. Changes were made
to the performance conditions for awards granted from 2018. The number of options that vest in respect of these awards is equally dependent on the
group\u2019s relative TSR and EPS growth (subject to Solvency II objectives). The majority of awards vest after the end of the three year performance period
and become exercisable in thirds in year three, four and five. Awards granted to Executive Directors and Persons Delivering Managerial Responsibilities
vest after three years but any options that vest will not become exercisable until year five.
The Share Bonus Plan (SBP) awards conditional shares, restricted shares, combined awards of CSOP options and restricted shares and combined
awards of CSOP options and nil-paid options. Recipients of restricted shares are entitled to both vote and receive dividends. Fair value is calculated as
the market value on the grant date, adjusted to reflect the eligibility for dividend payments. Conditional Share awards, which include awards to Executive
Directors, do not have voting or dividend rights. Shares in respect of dividend equivalents will normally be awarded when Conditional Share awards vest.
The savings related share option plan (ShareSave) allows employees to enter into a regular savings contract over three and/or five years, coupled with
a corresponding option over shares of the group. The grant price is equal to 80% of the quoted market price of the group shares on the invitation date.
Fair value is calculated using the Black-Scholes model.
Under the HMRC tax-advantaged Employee Share Plan (ESP), UK employees may elect to purchase group shares from the market at the prevailing
market price on a monthly basis. The group supplements the number of shares purchased by giving employees one free matching share for every one
share purchased up to the first \u00a320 of the employees\u2019 contributions and one free matching share for every two shares purchased with contributions
between \u00a320 and \u00a3125. There is currently no match on contributions between \u00a3125 and \u00a3150. From time to time, the group may make an award of
free shares. Both the free and matching shares must be held in trust for three years. The fair value of awarded shares is equal to the market value on
award date.
The weighted average fair value of options and awards granted during the year, estimated by using Monte Carlo simulations were 61.7p and 169.5p for
the ShareSave options and PSP awards respectively.
The fair values of the share awards made during the year have been calculated using the following assumptions:
ShareSave PSP
Award date 8 April 2022 19 April 2022
Weighted average share price (pence) 268.8 271.1
Weighted average exercise price (pence) 205.0 N/A
Expected volatility 34% 45%
Expected life 3\u20135 years 3\u20135 years
Risk-free investment rate 1.52%\u20131.55% 1.64%
Dividend yield 6.3% 6.4%
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022230 Financial statements
13.2_Financial_statements_v3.indd 23013.2_Financial_statements_v3.indd 230 14/03/2023 20:2114/03/2023 20:21
(ii) Total recognised expense
The total recognised expense relating to share-based payments in 2022 was \u00a354m (2021: \u00a333m) before tax, all of which related to equity settled share
schemes. This is broken down between the group\u2019s plans as detailed below:
2022 2021
\u00a3m \u00a3m
Share Bonus Plan (SBP) 38 24
Performance Share Plan (PSP) 12 5
Employee Share Plan (ESP) 2 2
Savings related share option scheme (ShareSave) 2 2
Total share-based payment expense 54 33
(iii) Outstanding share options
ShareSave
options
2022
Weighted
average
exercise
price
2022
p
CSOP
options
2022
Weighted
average
exercise
price
2022
p
SBP
options
2022
Weighted
average
exercise
price
2022
p
Outstanding at 1 January 19,206,594 212 3,963,756 256 568,137 \u2013
Granted during the year 11,768,715 205 2,719,728 272 355,739 \u2013
Forfeited during the year (3,494,833) 219 \u2013 \u2013 \u2013 \u2013
Exercised during the year (2,837,683) 214 \u2013 \u2013 (4,008) \u2013
Expired during the year (658,933) 211 (1,169,981) 281 (122,750) \u2013
Outstanding at 31 December 23,983,860 207 5,513,503 258 797,118 \u2013
Exercisable at 31 December 3,151 217 \u2013 \u2013 139,804 \u2013
Weighted average remaining contractual life (years) 3 9 8
ShareSave
options
2021
Weighted
average
exercise
price
2021
p
CSOP
options
2021
Weighted
average
exercise
price
2021
p
SBP
options
2021
Weighted
average
exercise
price
2021
p
Outstanding at 1 January 18,232,974 204 3,95 7,155 246 586,514 \u2013
Granted during the year 6,186,694 230 1,369,409 125 152,723 \u2013
Forfeited during the year (1,265,946) 212 \u2013 \u2013 \u2013 \u2013
Exercised during the year (3,057,038) 202 (1,089,506) 269 (134,231) \u2013
Expired during the year (890,090) 208 (273,302) 255 (36,869) \u2013
Outstanding at 31 December 19,206,594 212 3,963,756 256 568,137 \u2013
Exercisable at 31 December 12,969 194 \u2013 \u2013 52,410 \u2013
Weighted average remaining contractual life (years) 3 9 8
(iv) Total options
Options over 30,294,481 shares (2021: 23,738,488 shares) are outstanding under CSOP, ShareSave and SBP as at 31 December 2022. These options
have a range of exercise prices between 0p and 295p (2021: 0p and 295p) and maximum remaining contractual life up to 2032 (2021: 2031).
Legal & General Group Plc\u2002Annual Report and Accounts 2022 231
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 23113.2_Financial_statements_v3.indd 231 14/03/2023 20:2114/03/2023 20:21
34 Share capital, share premium and employee scheme treasury shares
An equity instrument is any contract which evidences a residual interest in the net assets of an entity. It follows that a financial instrument is
treated as equity if:
\u2022 there is no contractual obligation to deliver cash or other financial assets or to exchange financial assets or liabilities on unfavourable terms;
and
\u2022 the instrument is either a non-derivative which contains no contractual obligation to deliver a variable number of own equity instruments, or is a
derivative which will be settled only by the group exchanging a fixed amount of cash, or other financial assets, for a fixed number of its own
equity instruments.
Where any group entity purchases the company\u2019s equity share capital, the consideration paid, including any directly attributable incremental costs
(net of income taxes), is deducted from equity attributable to shareholders. Where such shares are subsequently sold, reissued or otherwise
disposed of, any consideration received is included in equity attributable to shareholders, net of any directly attributable incremental transaction
costs and the related income tax effects. Shares held on behalf of employee share schemes are disclosed as such on the Consolidated Balance
Sheet.
(i) Share capital and share premium
2022 2021
Number of 2022 Number of 2021
Authorised share capital shares \u00a3m shares \u00a3m
At 31 December: ordinary shares of 2.5p each 9,200,000,000 230 9,200,000,000 230
Share Share
Number of capital premium
Issued share capital, fully paid shares \u00a3m \u00a3m
As at 1 January 2022 5,970,415,817 149 1,012
Options exercised under share option schemes 2,837,683 \u2013 6
As at 31 December 2022 5,973,253,500 149 1,018
Share Share
Number of capital premium
Issued share capital, fully paid shares \u00a3m \u00a3m
As at 1 January 2021 5,967,358,713 149 1,006
Options exercised under share option schemes 3,057,10 4 \u2013 6
As at 31 December 2021 5,970,415,817 149 1,012
There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights.
The holders of the company\u2019s ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings
of the company.
(ii) Employee share plans
The group uses the Employees\u2019 Share Ownership Trust (ESOT) and the Legal & General Group Employee Share Plan (ESP) to purchase and hold shares
of the group for delivery to employees under various employee share plans. Shares owned by these vehicles are included at cost in the Consolidated
Balance Sheet and are shown as a deduction from shareholders\u2019 equity. They are disclosed as employee plan shares until they vest to employees.
Share-based liabilities to employees may also be settled via purchases directly from the market or by the issue of new shares.
The ESOT has waived its voting rights and its rights to some of the dividends payable on the shares it holds. Employees are entitled to dividends on the
shares held on their behalf within the ESP.
2022 2021
Number of 2022 Number of 2021
shares \u00a3m shares \u00a3m
As at 1 January 42,700,058 99 35,306,671 75
Shares purchased 23,424,103 59 11,862,090 34
Shares vested (5,316,948) (14) (4,468,703) (10)
As at 31 December 60,807,213 144 42,700,058 99
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022232 Financial statements
13.2_Financial_statements_v3.indd 23213.2_Financial_statements_v3.indd 232 14/03/2023 20:2114/03/2023 20:21
35 Restricted Tier 1 convertible notes
On 24 June 2020, Legal & General Group Plc issued \u00a3500m of 5.625% perpetual restricted Tier 1 contingent convertible notes. The notes are callable at
par between 24 March 2031 and 24 September 2031 (the First Reset Date) inclusive and every 5 years after the First Reset Date. If not called, the coupon
from 24 September 2031 will be reset to the prevailing five year benchmark gilt yield plus 5.378%.
The notes have no fixed maturity date. Optional cancellation of coupon payments is at the discretion of the issuer and mandatory cancellation is upon
the occurrence of certain conditions. The Tier 1 notes are therefore treated as equity and coupon payments are recognised directly in equity. During the
year coupon payments of \u00a328m were made (2021: \u00a328m). The notes rank junior to all other liabilities and senior to equity attributable to shareholders.
On the occurrence of certain conversion trigger events the notes are convertible into ordinary shares of the issuer at the prevailing conversion price.
The notes are treated as restricted Tier 1 own funds for Solvency II purposes.
36 Non-controlling interests
Non-controlling interests represent third party interests in direct equity investments, including private equity, which are consolidated in the group\u2019s results.
As at 31 December 2022, non-controlling interests primarily represent third party ownership in Thorpe Park Holdings, a mixed residential/commercial
retail space in which the group holds 50%.
37 Other liabilities
2022 2021
\u00a3m \u00a3m
Accruals 517 454
Deferred income 40 26
Other 166 445
Total other liabilities 723 925
Due within 12 months 668 887
Due after 12 months 55 38
38 Reconciliation of assets under management to the Consolidated Balance Sheet
2022 2021
\u00a3bn \u00a3bn
Assets under management
1
1,196 1,421
Derivative notionals
1,2
(337) (383)
Third party assets
1,3
(412) (480)
Other
1,4
44 7
Total financial investments, investment property and cash and cash equivalents 491 565
1. These balances are unaudited.
2. Derivative notionals are included in the assets under management measure but are not for IFRS reporting and are thus removed.
3. Third party assets are those that LGIM manage on behalf of others which are not included on the group\u2019s Consolidated Balance Sheet.
4. Other includes assets that are managed by third parties on behalf of the group, other assets and liabilities related to financial investments, derivative assets and pooled funds.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 233
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 23313.2_Financial_statements_v3.indd 233 14/03/2023 20:2114/03/2023 20:21
39 Related party transactions
(i) Key management personnel transactions and compensation
All transactions between the group and its key management are on commercial terms which are no more favourable than those available to employees
in general. There were no material transactions between key management and the Legal & General group of companies during the year. Contributions to
the post-employment defined benefit plans were \u00a3105m (31 December 2021: \u00a3109m) for all employees.
At 31 December 2022 and 31 December 2021 there were no loans outstanding to officers of the company.
The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows:
2022 2021
\u00a3m \u00a3m
Salaries 11 10
Share-based incentive awards 6 5
Key management personnel compensation 17 15
(ii) Services provided to and by related parties
All transactions between the group and associates, joint ventures and other related parties during the year are on commercial terms which are no more
favourable than those available to companies in general.
The group has entered into the following material related party transactions during the year:
\u2022 Annuity contracts issued by Legal and General Assurance Society Limited (LGAS), a group company, for consideration of \u00a361m (2021: \u00a382m) have
been purchased by the group\u2019s UK defined benefit pension schemes, priced on an arm\u2019s length basis; and
\u2022 The Legal & General Group UK Pension and Assurance Fund (the Fund) and the Legal & General Group UK Senior Pension Scheme (the Scheme)
completed an Assured Payment Policy (APP) transaction with LGAS including \u00a383m of top-ups in 2022 under the existing contracts. An APP is an
investment contract product sold by LGRI which, issued to a pension scheme, provides the scheme with a fixed or inflation linked schedule of
payments to match the scheme\u2019s expected liabilities.
As at 31 December 2022, LGAS recognised a liability related to this APP transaction with the Fund and Scheme of \u00a3820m (2021: \u00a31,214m) which is
included in the group\u2019s non-participating investment contract liabilities. The UK defined benefit pension schemes hold transferable plan assets of the
same amounts, which do not eliminate on consolidation.
Loans and commitments to related parties are made in the normal course of business. As at 31 December 2022, the group had:
\u2022 Loans outstanding from related parties of \u00a358m (2021: \u00a315m), with a further commitment of \u00a36m; and
\u2022 Total other commitments of \u00a31,265m to related parties (2021: \u00a31,158m), of which \u00a31,010m has been drawn at 31 December 2022 (2021: \u00a3726m).
40 Contingent liabilities, guarantees and indemnities
Provision for the liabilities arising under contracts with policyholders is based on certain assumptions. The variance between actual experience from that
assumed may result in those liabilities differing from the provisions made for them. Liabilities may also arise in respect of claims relating to the
interpretation of policyholder contracts, or the circumstances in which policyholders have entered into them. The extent of these liabilities is influenced
by a number of factors including the actions and requirements of the PRA, FCA, ombudsman rulings, industry compensation schemes and court
judgments.
Various group companies receive claims and become involved in actual or threatened litigation and regulatory issues from time to time. The relevant
members of the group ensure that they make prudent provision as and when circumstances calling for such provision become clear, and that each has
adequate capital and reserves to meet reasonably foreseeable eventualities. The provisions made are regularly reviewed. It is not possible to predict, with
certainty, the extent and the timing of the financial impact of these claims, litigation or issues.
Group companies have given warranties, indemnities and guarantees as a normal part of their business and operating activities or in relation to capital
market transactions or corporate disposals. Legal & General Group Plc has provided indemnities and guarantees in respect of the liabilities of group
companies in support of their business activities including Pension Protection Fund compliant guarantees in respect of certain group companies\u2019
liabilities under the group pension Fund and Scheme. Legal and General Assurance Society Limited has provided indemnities, a liquidity and expense risk
agreement, a deed of support and a cash and securities liquidity facility in respect of the liabilities of group companies to facilitate the group\u2019s matching
adjustment reorganisation pursuant to Solvency II.
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022234 Financial statements
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41 Commitments
(i) Capital commitments
2022 2021
\u00a3m \u00a3m
Authorised and contracted commitments not provided for in respect of investment property development, payable after 31 December:
\u2013 Long-term business 640 680
(ii) Lease commitment receivable \u2013 payments to be received under operating leases
Under certain lease agreements, the group, as the lessor, is considered to substantially retain all the risks and reward of ownership of the
underlying asset, therefore these contracts have been classified as operating leases.
The future undiscounted minimum lease payments under such arrangements are disclosed below:
Total Total
future future
payments payments
2022 2021
\u00a3m \u00a3m
Within 1 year 392 342
1-2 years 374 330
2-3 years 360 311
3-4 years 347 298
4-5 years 334 287
After 5 years 4,110 3,391
Total lease commitment receivable 5,917 4,959
Lease commitments payable are disclosed as part of the lease disclosure in Note 25.
42 Subsidiaries
The Companies Act 2006 requires disclosure of information about the group\u2019s subsidiaries, associates, joint ventures and other significant
holdings. A complete list of the group\u2019s subsidiaries, associates, joint ventures and significant holdings is provided in Notes 42 and 43.
Subsidiaries are those entities (including special purpose entities, mutual funds and unit trusts) over which the group directly or indirectly has
the power to govern the operating and financial policies in order to gain economic benefits. Profits or losses of subsidiary undertakings sold or
acquired during the year are included in the consolidated results up to the date of disposal or from the date of gaining control. The interests of
parties, other than the group, in investment vehicles, such as unit trusts, are classified as liabilities and appear as \u2018Net asset value attributable
to unit holders\u2019 in the Consolidated Balance Sheet. The basis by which subsidiaries are consolidated in the group financial statements is outlined
in the Basis of preparation (Note 1).
The particulars of the company\u2019s subsidiaries, mutual funds and partnerships that have been consolidated as at 31 December 2022 are listed below.
The main territory of operation of subsidiaries incorporated in England and Wales is the UK. For overseas subsidiaries the principal country of operation
is the same as the country of incorporation. All subsidiaries have a 31 December year end reporting date and are 100% owned, unless stated otherwise.
The registered office of all subsidiaries in England and Wales is One Coleman Street, London EC2R 5AA, United Kingdom, and in Ireland is Dillon Eustace,
33 Sir John Rogerson\u2019s Quay, Dublin 2, Ireland, unless otherwise noted. All subsidiaries are held through intermediate holding companies unless noted
that they are held direct by the company. Subsidiaries that are consolidated where the group owns less than 50% of the ordinary share capital,
are consolidated based on an assessment of control normally arising from special rights attaching to the class of share owned, other contractual
arrangements and factors such as the purpose of the investee, the nature of its relevant activities, voting rights (including potential voting rights)
and substantive and protective rights.
The group reassesses the appropriateness of the consolidation of an investee whenever facts and circumstances indicate that there has been a change
in the relationship between the group and the investee which affects control.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 235
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 23513.2_Financial_statements_v3.indd 235 14/03/2023 20:2114/03/2023 20:21
42 Subsidiaries continued
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
Country of incorporation: Bermuda
First British Bermuda Reinsurance Company III Limited
1
Reinsurance Ordinary 31\u2013Dec 100.0
Legal & General America Reinsurance Limited
2
Reinsurance Ordinary 31\u2013Dec 100.0
Legal & General Reinsurance Company Limited
2
Reinsurance Ordinary 31\u2013Dec 100.0
Legal & General Reinsurance Company No.2 Limited
2
Reinsurance Ordinary 31\u2013Dec 100.0
Legal & General Resources Bermuda Limited
2
Provision of services Ordinary 31\u2013Dec 100.0
Country of incorporation: China
Legal & General Business Consulting (Shanghai) Limited
3
Business information consultancy Ownership dictated by
subscribed capital
31\u2013Dec 100.0
Country of incorporation: England and Wales
245 Hammersmith Road (General Partner) Limited General partner Partnership 31\u2013Dec 50.0
245 Hammersmith Road Nominee 1 Limited Dormant company Ordinary 31\u2013Dec 50.0
245 Hammersmith Road Nominee 2 Limited Dormant company Ordinary 31\u2013Dec 50.0
245 HR GP LLP Limited liability partnership Partnership 31\u2013Dec 50.0
Accelerated Digital Ventures Limited Activities of venture and development capital companies Ordinary 31\u2013Dec 100.0
ADV (GP) LLP Limited liability partnership Partnership 31\u2013Dec 100.0
ADV ECF LP Limited partnership Partnership 31\u2013Dec 100.0
ADV Management Limited Fund management activities Ordinary 31\u2013Dec 100.0
ADV Nominees Limited Activities of venture and development capital companies Ordinary 31\u2013Dec 100.0
Antham 1 Limited Investment vehicle Ordinary 31\u2013Dec 100.0
Atelier Management Company Limited ECF Manco
4
Ordinary 31\u2013May \u2013
Banner (Spare) Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Construction Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Developments Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Freehold Limited
5
Letting and operating of leased real estate Ordinary 31\u2013Dec 100.0
Banner Homes Bentley Priory Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Homes Central Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Homes Group Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Homes Limited
5
Dormant company Ordinary 31\u2013Dec 100.0
Banner Homes Midlands Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Homes Southern Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Homes Ventures Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Banner Management Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Begbroke Oxford Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0
BQN Limited Development of building projects Ordinary 31\u2013Dec 100.0
BTR Core Limited Investment vehicle Ordinary 31\u2013Dec 100.0
BTR Residential Development Company Limited Development of building projects Ordinary 31\u2013Dec 100.0
Bucklers Park Estate Management Company Limited Management of real estate Limited by guarantee 31\u2013May 100.0
C1 Plot Management Company Limited Residential property management Limited by guarantee 31\u2013Dec 33.3
CALA (ESOP) Trustees Limited
5
Financial intermediation Ordinary 31\u2013Dec 100.0
CALA 1 Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Group (Holdings) Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes (Chiltern) Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes (Midlands) Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes (North Home Counties) Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes (South Home Counties) Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes (Southern) Limited
5
Non-trading company Ordinary 31\u2013Dec 100.0
CALA Homes (Thames) Limited
5
Non-trading company Ordinary 31\u2013Dec 100.0
CALA Homes (Yorkshire) Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Properties Banbury Limited
5
Dormant company Ordinary 31\u2013Dec 100.0
Cardiff Interchange Limited Development of building projects Ordinary 31\u2013Dec 100.0
Cardiff Interchange ManCo Limited Management company Ordinary 31\u2013Jan 25.0
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022236 Financial statements
13.2_Financial_statements_v3.indd 23613.2_Financial_statements_v3.indd 236 14/03/2023 20:2114/03/2023 20:21
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
Care Secured Limited
5
Dormant company Ordinary 31\u2013Dec 100.0
City & Urban Developments Limited Holding company Ordinary 31\u2013Dec 100.0
Court Place Gardens Holdings LLP Holding company Partnership 31\u2013Dec 100.0
Court Place Gardens Oxford Limited Activities of other holding companies not
elsewhere classified
Ordinary 31\u2013Dec 100.0
Cross Trees Park (Shrivenham) Management
Company Limited
Residential property management Limited by guarantee 31\u2013Dec 100.0
Euro Liquidity Fund OEIC
6
Ordinary 31\u2013Dec 47.1
Finchwood Park Management Company Limited Residential property management Limited by guarantee 31\u2013Dec 100.0
Finovation UK Limited Dormant company Ordinary 31\u2013Dec 100.0
Haut Investments 2 Limited Holding company Ordinary 31\u2013Dec 100.0
Haut Investments Limited Holding company Ordinary 30\u2013Dec 100.0
Hockley Mills UK BTR Limited Partnership Private fund limited partnership Partnership 31\u2013Dec \u2013
Inspired Villages Group Limited Activities of other holding companies
not elsewhere classified
Ordinary 31\u2013Dec 46.5
Interchange Central Square (General Partner) Limited General partner Partnership 31\u2013Dec 100.0
Interchange Central Square Limited Partnership Limited liability partnership Partnership 31\u2013Dec 100.0
Investment Discounts On Line Limited Insurance agents and brokers Ordinary 31\u2013Dec 100.0
IPIF Trade General Partner Limited Fund general partner Partnership 31\u2013Dec 100.0
IPIF Trade Nominee Limited Nominee Ordinary 31\u2013Dec 100.0
IVG Managers Limited
7
Dormant company Ordinary 31\u2013Dec 46.5
IVG Millbrook LLP
7
Dormant company Partnership 31\u2013Dec 46.5
IXDS Limited Other information technology services Ordinary 31\u2013Dec 70.0
Jimcourt Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
L&G Bristol Temple Island Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0
L&G Cash Trust Unit trust Unit 05\u2013Feb 52.6
L&G Future World ESG Asia Pacific Index Fund Unit trust Unit 30\u2013Sep 69.8
L&G Future World ESG Emerging Markets Index Fund Unit trust Unit 30\u2013Sep 56.4
L&G Future World ESG Europe ex UK Index Fund Unit trust Unit 30\u2013Sep 80.0
L&G Future World ESG Japan Index Fund Unit trust Unit 30\u2013Sep 71.6
L&G Future World ESG Multi-Index 6 Fund Unit trust Unit 15\u2013Feb 42.5
L&G Future World ESG Multi-Index 7 Fund Unit trust Unit 15\u2013Feb 56.2
L&G Future World ESG North America Index Fund Unit trust Unit 30\u2013Sep 94.0
L&G Future World ESG UK Index Fund Unit trust Unit 30\u2013Sep 51.6
L&G Future World Sustainable Global Equity Focus Unit trust Unit 15\u2013May 99.9
L&G Future World Sustainable Opportunities Unit trust Unit 30\u2013Sep 88.2
L&G Global Developed Four Factor Scientific Beta
Index Fund
Authorised contractual schemes Ordinary 31\u2013Dec 31.4
L&G Homes Modular JV Holdco Limited Development of modular housing Ordinary 31\u2013Dec 100.0
L&G Multi-Asset Target Return Fund Unit trust Unit 14\u2013Apr 41.5
Legal & General (Portfolio Management Services) Limited Institutional fund management Ordinary 31\u2013Dec 100.0
Legal & General (Portfolio Management Services)
Nominees Limited
Dormant company Ordinary 31\u2013Dec 100.0
Legal & General (Residential) Holdco Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General (Strategic Land Harpenden) Limited Activities of other holding companies not
elsewhere classified
Ordinary 31\u2013Dec 100.0
Legal & General (Strategic Land North Horsham) Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General (Strategic Land) Limited Holding company Ordinary 31\u2013Dec 100.0
1. Registered office: Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda
2. Registered office: 19 Par-La-Ville Road, Hamilton, HM11, Bermuda
3. Registered office: Southwest ROOM, Floor 3, No. 2123 Pudong Avenue, China (Shanghai) Pilot Free Trade Zone (Bonded Area), Pudong District, Shanghai
4. English Cities Fund Management Company
5. Registered office: Cala House, 54 The Causeway, Surrey, TW18 3AX
6. Open Ended Investment Company
7. Registered office: Unit 3 Edwalton Business Park, Landmere Lane, Edwalton, Nottingham, United Kingdom, NG12 4JL
Legal & General Group Plc\u2002Annual Report and Accounts 2022 237
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 23713.2_Financial_statements_v3.indd 237 14/03/2023 20:2114/03/2023 20:21
42 Subsidiaries continued
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
Legal & General (Unit Trust Managers) Limited Unit trust management Ordinary 31\u2013Dec 100.0
Legal & General (Unit Trust Managers) Nominees Limited Non-trading company Ordinary 31\u2013Dec 100.0
Legal & General Affordable Homes (AR) LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General Affordable Homes (Capital) Limited Dormant company Ordinary 31\u2013Dec 100.0
Legal & General Affordable Homes (Development 2)
Limited
Domestic building construction Ordinary 31\u2013Dec 100.0
Legal & General Affordable Homes (Development 3)
Limited
Domestic building construction Ordinary 31\u2013Dec 100.0
Legal & General Affordable Homes (Development)
Limited
Domestic building construction Ordinary 31\u2013Dec 100.0
Legal & General Affordable Homes (Operations) Limited Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General Affordable Homes (SO) LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General Affordable Homes Limited Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General BTR Investment Nominee Limited Limited company Ordinary 30\u2013Sep 100.0
Legal & General Capital Investments Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Co Sec Limited Dormant company Ordinary 31\u2013Dec 100.0
Legal & General Development Assets Holdings Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Digital Solutions Limited Technology services Ordinary 31\u2013Dec 100.0
Legal & General Employee Benefits
Administration Limited
Non-trading company Ordinary 31\u2013Dec 100.0
Legal & General Estate Agencies Limited Management of dilapidation liabilities Ordinary 31\u2013Dec 100.0
Legal & General Euro Mortgage No.1 SPV Limited Special purpose vehicle Ordinary 31\u2013Dec 100.0
Legal & General Finance PLC Treasury operations Ordinary 31\u2013Dec 100.0
Legal & General Financial Advice Limited Provision of services Ordinary 31\u2013Dec 100.0
Legal & General FX Structuring (SPV) Limited Special purpose vehicle Ordinary 31\u2013Dec 100.0
Legal & General GP LLP Development of building projects Partnership 31\u2013Dec 100.0
Legal & General Holdings No.2 Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Home Finance Administration Services
Limited
Provision of services Ordinary 31\u2013Dec 100.0
Legal & General Home Finance Holding Company Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Home Finance Limited Mortgage finance companies Ordinary 31\u2013Dec 100.0
Legal & General Homes (Services Co) Limited Human resource management Ordinary 31\u2013Dec 100.0
Legal & General Homes Communities (Arborfield) Limited Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General Homes Communities (Crowthorne)
Limited
Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General Homes Communities (Didcot) Limited Other specialised construction activities
not elsewhere classified
Ordinary 31\u2013Dec 100.0
Legal & General Homes Communities (Shrivenham)
Limited
Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General Homes Communities Limited Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General Homes Holdings Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Homes Modular JV Limited Development of modular housing Ordinary 31\u2013Dec 100.0
Legal & General Homes Modular Limited Development of modular housing Ordinary 31\u2013Dec 100.0
Legal & General Insurance Holdings Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Insurance Holdings No. 2 Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Investment Management (Holdings)
Limited
Holding company Ordinary 31\u2013Dec 100.0
Legal & General Investment Management Funds ICVC OEIC
6
Ordinary 31\u2013Dec 100.0
Legal & General Investment Management Limited Institutional fund management Ordinary 31\u2013Dec 100.0
Legal & General Later Living Limited Holding company Ordinary 31\u2013Oct 100.0
Legal & General Leisure Fund Trustee Limited Trustee Ordinary 31\u2013Dec 100.0
Legal & General LTM Structuring (SPV) Limited Special purpose vehicle Ordinary 31\u2013Dec 100.0
Legal & General Middle East Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Overseas Operations Limited Holding company Ordinary 31\u2013Dec 100.0
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022238 Financial statements
13.2_Financial_statements_v3.indd 23813.2_Financial_statements_v3.indd 238 14/03/2023 20:2114/03/2023 20:21
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
Legal & General Partnership Holdings Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Partnership Services Limited Provision of services Ordinary 31\u2013Dec 100.0
Legal & General Pension Fund Trustee Limited Dormant company Ordinary 31\u2013Dec 100.0
Legal & General Pension Scheme Trustee Limited Dormant company Ordinary 31\u2013Dec 100.0
Legal & General Pensions Limited Limited company Ordinary 31\u2013Dec 100.0
Legal & General Property Limited Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (Industrial Fund)
Limited
General partner Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (Industrial)
Nominees Limited
Nominee Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (IPIF GP) LLP General partner Partnership 31\u2013Dec 100.0
Legal & General Property Partners (Leisure GP) LLP General partner Partnership 31\u2013Dec 100.0
Legal & General Property Partners (Leisure) Limited General partner Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (Life Fund) Limited Investment vehicle Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (Life Fund)
Nominee Limited
Investment vehicle Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (UK PIF) Limited General partner Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (UKPIF Geared Two)
Limited
Investment in UK real estate Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (UK PIF Geared)
Limited
General partner Ordinary 31\u2013Dec 100.0
Legal & General Property Partners (UKPIF Two) Limited Investment in UK real estate Ordinary 31\u2013Dec 100.0
Legal & General Re Holdings Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Residential (BTR) 1 LLP Investment management Partnership 31\u2013Dec 100.0
Legal & General Residential (BTR) 2 LLP Investment management Partnership 31\u2013Dec 100.0
Legal & General Resources Limited Provision of services Ordinary 31\u2013Dec 100.0
Legal & General Retail Investments (Holdings) Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Science and Tech (Holdings) Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Senior Living Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General Suburban BTR (Development 2) Limited Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General Suburban BTR (Development) Limited Domestic building construction Ordinary 31\u2013Dec 100.0
Legal & General Suburban BTR (Operations) Limited Development of building projects Ordinary 31\u2013Dec 100.0
Legal & General Suburban BTR (Property) LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General Surveying Services Limited Provision of services Ordinary 31\u2013Dec 100.0
Legal & General Trustees Limited Fund trustee Ordinary 31\u2013Dec 100.0
Legal & General UK BTR GP Five LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General UK BTR GP Four LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General UK BTR GP LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General UK BTR GP Six LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General UK BTR GP Three LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General UK BTR Investment GP LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal & General UK BTR Investment LP Limited partnership Partnership 31\u2013Dec 100.0
Legal & General UK BTR Investment Nominee Limited Fund management activities Ordinary 31\u2013Dec 100.0
Legal & General UK Solar Investments (Holdings) Limited Holding company Ordinary 31\u2013Dec 100.0
Legal & General UKPIF Two GP LLP Limited liability partnership Partnership 31\u2013Dec 100.0
Legal and General Assurance (Pensions Management)
Limited
Insurance Ordinary 31\u2013Dec 100.0
Legal and General Assurance Society Limited Long-term and general insurance Ordinary 31\u2013Dec 100.0
Legal and General Capital IM Company Limited Fund management activities Ordinary 31\u2013Dec 100.0
LGC Overseas Holdco Limited Activities of other holding companies not
elsewhere classified
Ordinary 31\u2013Dec 100.0
6. Open Ended Investment Company
Legal & General Group Plc\u2002Annual Report and Accounts 2022 239
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 23913.2_Financial_statements_v3.indd 239 14/03/2023 20:2114/03/2023 20:21
LGC TEP UK Holdco Limited Activities of construction holding companies Ordinary 31\u2013Dec 100.0
LGCP Nominee 1 Limited Activities of other holding companies not
elsewhere classified
Ordinary 31\u2013Dec 100.0
LGIM Commercial Lending Limited Commercial lending Ordinary 31\u2013Dec 100.0
LGIM International Limited Institutional fund management Ordinary 31\u2013Dec 100.0
LGIM OEIC Corporate Bond Fund OEIC
6
Ordinary 31\u2013Dec 33.8
LGIM Real Assets (Operator) Limited Development of building projects Ordinary 31\u2013Dec 100.0
LGIM Real Assets Limited Development of building projects Ordinary 31\u2013Dec 100.0
LGP Newco Limited Dormant company Ordinary 31\u2013Dec 100.0
LGPL No 2 Limited Fund management activities Ordinary 30\u2013Sep 100.0
Life and Mind Building Oxford Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0
Maltby Street Properties Limited Investment property holding company Ordinary 31\u2013Dec 11.1
Millbay Estate Management Company Limited
8
Non-trading company Limited by guarantee 31\u2013Dec \u2013
Novella Building Management Company Limited ECF Manco
4
Ordinary 3\u2013Mar \u2013
NSC Building A Limited Real estate trading Ordinary 31\u2013Dec 100.0
NSC Building B Limited Real estate trading Ordinary 31\u2013Dec 100.0
Portholme Residents Management Company Limited Resident property management Ordinary 30\u2013Nov 100.0
Rowley Lane Borehamwood Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0
Sapphire Campus Management Company Limited Investment vehicle Ordinary 31\u2013Dec 9.5
Senior Living Medici Holdco Limited
9
Dormant company Ordinary 31\u2013Dec 100.0
Senior Living Medici Limited
9
Dormant company Ordinary 31\u2013Dec 100.0
Senior Living Urban (Bath) Limited Buying and selling of own real estate Ordinary 31\u2013Oct 100.0
Senior Living Urban (Epsom) Limited Buying and selling of own real estate Ordinary 31\u2013Dec 100.0
Senior Living Urban (Uxbridge) Limited Buying and selling of own real estate Ordinary 31\u2013Oct 100.0
Senior Living Urban (Walton) Limited Buying and selling of own real estate Ordinary 31\u2013Dec 100.0
SMART Pension Limited
10
Other information service activities not
elsewhere classified
Unit 31\u2013Mar 7.5
Stratford City Offices (No. 2) General Partner Limited General partner Partnership 31\u2013Dec 100.0
Stratford City Offices (No. 2) Limited Partnership Limited partnership Partnership 31\u2013Dec 100.0
Stratford City Offices Jersey Unit Trust (No. 2) Unit trust Ordinary 31\u2013Dec 99.8
Sunderland Vaux 1 Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0
Swindon (The Hub) Management Company Limited
11
Management of real estate Ordinary 31\u2013Mar 82.8
The Advantage Collection Limited
5
Domestic building construction Ordinary 31\u2013Dec 100.0
Thorpe Park 3175 Limited
12
Buying and selling of own real estate Ordinary 31\u2013Dec 50.0
Thorpe Park A2 Limited
12
Other letting and operating of own or leased real estate Ordinary 31\u2013Dec 50.0
Thorpe Park Developments Limited
12
Property development company Ordinary 31\u2013Dec 50.0
Thorpe Park Holdings Limited
12
Holding company Ordinary 31\u2013Dec 50.0
Tower Works UK BTR Limited Partnership Private fund limited partnership Partnership 31\u2013Dec \u2013
TP Property Services Limited
12
Property services Ordinary 31\u2013Dec 50.0
Valette Square Management Company Limited Other service activities not elsewhere classified Ordinary 30\u2013Nov 33.0
Venturemarket.org Limited Activities of venture and development capital companies Ordinary 31\u2013Dec 100.0
West Bar Square Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0
Country of incorporation: Hong Kong
Legal & General Investment Management Asia Limited
13
Investment management Ordinary 31\u2013Dec 100.0
Country of incorporation: Ireland
Finovation Limited
14
Pension tracing and transfer service Ordinary and
convertible
31\u2013Dec 100.0
L&G Asia Pacific ex Japan Equity Index Fund ICAV
15
Ordinary 31\u2013Dec 29.2
L&G Frontier Markets Equity Fund ICAV
15
Ordinary 31\u2013Dec 51.1
L&G Future World Global Credit Fund \u2013 UK QIAIF
16
Ordinary 31\u2013Dec 100.0
L&G LFST Alternative Assets Fund QAIF ICAV
17
Ordinary 31\u2013Dec 47.4
L&G Multi Asset Core 20 Fund Unit trust Unit 15\u2013May 88.1
42 Subsidiaries continued
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022240 Financial statements
13.2_Financial_statements_v3.indd 24013.2_Financial_statements_v3.indd 240 14/03/2023 20:2114/03/2023 20:21
L&G Multi Asset Core 45 Fund Unit trust Unit 15\u2013May 82.7
L&G Multi Asset Core 75 Fund Unit trust Unit 15\u2013May 84.0
L&G Net Zero Sterling Corporate Bond Fund QIAIF
16
Ordinary 31\u2013Dec 25.0
Legal & General Fund Managers (Ireland) Limited
18
Institutional fund management Ordinary 31\u2013Dec 100.0
Legal & General QIAIF ICAV
19
QIAIF
16
Ordinary 31\u2013Dec 100.0
Legal & General UCITS Managers (Ireland) Limited Institutional fund management Ordinary 31\u2013Dec 100.0
LGIM (Ireland) Risk Management Solutions Plc Management company Ordinary 31\u2013Dec 100.0
LGIM 2024 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2025 Fixed Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2025 Inflation Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2025 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2030 Fixed Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2030 Inflation Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2030 Leverage Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2030 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2034 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2035 Fixed Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2035 Inflation Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2035 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2037 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2038 Leveraged Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2040 Fixed Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2040 Inflation Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2040 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2040 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2042 Leveraged Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2042 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2045 Fixed Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2045 Inflation Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2045 Leveraged Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2045 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2047 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2049 Leveraged Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2050 Fixed Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2050 Inflation Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2050 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2050 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2055 Fixed Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2055 Leveraged Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2055 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2055 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2060 Fixed Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2060 Inflation Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
4. English Cities Fund Management Company
5. Registered office: Cala House, 54 The Causeway, Surrey, TW18 3AX
6. Open Ended Investment Company
8. Registered office: Whittington Hall, Whittington Road, Worcester, Worcestershire, United Kingdom, WR5 2ZX
9. Registered office: The Stanley Building, 7 St Pancras Square, London, N1C 4AG
10. Registered office: 40 Eastbourne Terrace, London, England, W2 6LG
11. Registered office: 6th Floor Lansdowne House, Berkeley Square, London, United Kingdom, W1J 6ER
12. Registered office: Europa House, 20 Esplanade, Scarborough, North Yorkshire, YO11 2AQ
13. Registered office: Room 902, 9th Floor, Chinachem Tower, 34-37 Connaught Road Central, Hong Kong
14. Registered office: 70 Sir John Rogerson Quay, Dublin 2, D02 XK09, Ireland
15. Irish Collective Asset-management Vehicle
16. Qualifying Investor Alternative Investment Fund
17. Qualifying Investor Alternative Investment Fund Irish Collective Asset-management Vehicle
18. Registered office: Grand Canal House, 1 Upper Grand Canal Street, Dublin 4, Ireland
19. Registered office: 33/34 Sir John Rogerson\u2019s Quay Dublin 2, DO2 XK09, Ireland
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
Legal & General Group Plc\u2002Annual Report and Accounts 2022 241
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 24113.2_Financial_statements_v3.indd 241 14/03/2023 20:2114/03/2023 20:21
42 Subsidiaries continued
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
LGIM 2060 Leveraged Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2060 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2062 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2068 Leveraged Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM 2068 Leveraged Index Linked Gilt Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Bespoke Active Credit Fund BP QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Credit and Liquidity \u2013 Fund BM QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Credit and Liquidity \u2013 Fund BN QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Euro 2030 Real Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Fixed Long Duration Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Fixed Short Duration Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund A QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AC QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AE QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AI QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AK QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AO QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AR QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AS QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AT QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AU QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AV QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AW QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AY QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund AZ QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund B QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BB QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BF QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BG QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BH QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BI QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BJ QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BL QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BT QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BU QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund BV QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund C QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund CJ QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund CK QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund CI QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund CL QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund DC QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund DJ QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund DK QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund DO QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund L QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund O QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund Q QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund V QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund WH QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund WS QIAIF
16
Ordinary 31\u2013Dec 100.0
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022242 Financial statements
13.2_Financial_statements_v3.indd 24213.2_Financial_statements_v3.indd 242 14/03/2023 20:2114/03/2023 20:21
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
LGIM Hedging Fund WT QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Hedging Fund ZZ QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Leveraged Gilt Plus Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Leveraged Index Linked Gilt Plus Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Leveraged Synthetic Equity Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Maturing Buy & Maintain Credit Fund 2020-2024 QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Maturing Buy & Maintain Credit Fund 2025-2029 QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Maturing Buy & Maintain Credit Fund 2030-2034 QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Maturing Buy & Maintain Credit Fund 2035-2039 QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Maturing Buy & Maintain Credit Fund 2040-2054 QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Real Long Duration Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Real Short Duration Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund BA QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund BK QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund BW QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund BX QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund BY QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CA QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CB QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CC QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CD QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CF QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CG QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CH QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CP QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CQ QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CS QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CT QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CU QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund CW QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DB QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DE QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DF QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DH QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DI QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DM QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DN QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DQ QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DR QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DU QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DV QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DW QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Solutions Fund DY QIAIF
16
Ordinary 31\u2013Dec 50.0
LGIM Solutions Fund M QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Synthetic Leveraged Credit Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Synthetic Leveraged Equity Fund \u2013 GBP Currency
Hedged Fund
QIAIF
16
Ordinary 31\u2013Dec 100.0
LGIM Unleveraged Defensive Synthetic Equity Fund QIAIF
16
Ordinary 31\u2013Dec 100.0
16. Qualifying Investor Alternative Investment Fund
Legal & General Group Plc\u2002Annual Report and Accounts 2022 243
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 24313.2_Financial_statements_v3.indd 243 14/03/2023 20:2114/03/2023 20:21
Sterling Liquidity Fund OEIC
6
Ordinary 31\u2013Dec 48.8
US Dollar Liquidity Fund OEIC
6
Ordinary 31\u2013Dec 46.7
Country of incorporation: Japan
Legal & General Investment Management Japan KK
20
Investment management Ordinary 31\u2013Dec 100.0
Country of incorporation: Jersey
Access Development General Partner Limited
21
Fund general partner Partnership 31\u2013Dec 100.0
Bishopsgate Long Term Property Fund General
Partner Limited
22
Fund general partner Partnership 31\u2013Dec 100.0
Bishopsgate Long-term Property Fund Limited
Partnership
22
Limited partnership Partnership 31\u2013Dec 25.0
Bishopsgate Long-term Property Fund Nominees
No 1 Limited
22
Real estate operator Ordinary 31\u2013Dec 25.0
Bishopsgate Long-term Property Fund Nominees
No 2 Limited
22
Real estate operator Ordinary 31\u2013Dec 25.0
Borehamwood Property Unit Trust
22
Unit trust Unit 31\u2013Dec 100.0
SCBD S6 Trust
23
Unit trust Unit 31\u2013Dec 100.0
Stratford City Offices Jersey Unit Trust
23
Unit trust Unit 31\u2013Dec 100.0
Vantage General Partner Limited
21
Fund general partner Partnership 31\u2013Dec 100.0
Vantage London Limited Partnership
21
Limited partnership Partnership 31\u2013Dec 11.1
Country of incorporation: Luxembourg
L&G Absolute Return Bond Fund SICAV
24
Ordinary 31\u2013Dec 87.7
L&G Absolute Return Bond Plus Fund SICAV
24
Ordinary 31\u2013Dec 35.2
L&G Buy & Maintain Credit Fund SICAV
24
Ordinary 31\u2013Dec 98.6
L&G Commodity Index Fund SICAV
24
Ordinary 31\u2013Dec 79.8
L&G Emerging Markets Short Duration Bond Fund SICAV
24
Ordinary 31\u2013Dec 36.1
L&G Future World Global Credit Fund SICAV
24
Ordinary 31\u2013Dec 56.9
L&G Future World Global Equity Focus Fund SICAV
24
Ordinary 31\u2013Dec 84.4
L&G Global Diversified Credit Fund SICAV
24
Ordinary 31\u2013Dec 73.9
L&G Net Zero Global Corporate Bond Fund SICAV
24
Ordinary 31\u2013Dec 85.1
L&G NTR Clean Power GP S.\u00e0 r.L.
25
Fund general partner Partnership 31\u2013Dec 100.0
L&G UK Core Plus Bond Fund SICAV
24
Ordinary 31\u2013Dec 100.0
Country of incorporation: Scotland
CALA 1999 Limited
26
Holding company Ordinary 31\u2013Dec 100.0
CALA Group Limited
26
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes (East) Limited
27
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes (North) Limited
27
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes (Scotland) Limited
27
Non-trading company Ordinary 31\u2013Dec 100.0
CALA Homes (West) Limited
27
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Homes Limited
27
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Land Investments (Bearsden) Limited
26
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Land Investments Limited
26
Development of building projects Ordinary 31\u2013Dec 100.0
CALA Limited
26
Head office Ordinary 31\u2013Dec 100.0
CALA Management Limited
26
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Properties (Holdings) Limited
27
Non-trading company Ordinary 31\u2013Dec 100.0
CALA Ventures Limited
26
Domestic building construction Ordinary 31\u2013Dec 100.0
CALA Properties (Holdings) Limited
27
Non-trading company Ordinary 31\u2013Dec 100.0
CALA Ventures Limited
26
Domestic building construction Ordinary 31\u2013Dec 100.0
UK PIF FGP LLP
28
Limited liability partnership Partnership 31\u2013Dec 100.0
UK PIF Two Founder Partner Limited, LP
28
Fund general partner Partnership 31\u2013Dec 100.0
UKPIF Two Founder GP Limited
28
Fund general partner Partnership 31\u2013Dec 100.0
Country of incorporation: USA
Ancora Community Impact CDE LLC
29
Dormant company Ordinary 31\u2013Dec 50.0
Ancora Investments LLC
29
Management of real estate investments Ordinary 31\u2013Dec 50.0
42 Subsidiaries continued
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022244 Financial statements
13.2_Financial_statements_v3.indd 24413.2_Financial_statements_v3.indd 244 14/03/2023 20:2114/03/2023 20:21
Ancora L&G, LLC
30
Holding company for investment in subsidiaries Ordinary 31\u2013Dec 50.0
Ancora Partners, LLC
29
Provision of management services Ordinary 31\u2013Dec 50.0
Ancora TEP Holdings LLC
30
Holding company Ordinary 31\u2013Dec 99.8
Ancora TEP JV LLC
30
Holding company Class A and Class B
shares
31\u2013Dec 99.8
Banner Life Insurance Company
31
Long-term business Ordinary 31\u2013Dec 100.0
Chesapeake Ventures, LLC
29
Limited company Ordinary 31\u2013Dec 100.0
FBV Financing-1, LLC
29
Limited company Ordinary 31\u2013Dec 100.0
FBV Financing-2, LLC
29
Limited company Ordinary 31\u2013Dec 100.0
FBV Financing-3, LLC
29
Limited company Ordinary 31\u2013Dec 100.0
First British Vermont Reinsurance Company II, Limited
32
Reinsurance Ordinary 31\u2013Dec 100.0
First British Vermont Reinsurance Company III, Limited
29
Reinsurance Ordinary 31\u2013Dec 100.0
Global Index Advisors Inc.
33
Investment advisory Ordinary 31\u2013Dec 100.0
Legal & General America Inc.
34
Holding company Ordinary 31\u2013Dec 100.0
Legal & General Investment Management America Inc.
34
Institutional fund management Ordinary 31\u2013Dec 100.0
Legal & General Investment Management United States
(Holdings), Inc.
34
Holding company Ordinary 31\u2013Dec 100.0
LGC US Holdco 1 Inc.
34
Holding company Ordinary 31\u2013Dec 100.0
LGC US Holdco 2 LLC
30
Holding company Ordinary 31\u2013Dec 100.0
William Penn Life Insurance Company of New York Inc.
35
Long term business Ordinary 31\u2013Dec 100.0
6. Open Ended Investment Company
20. Registered office: 22F Toranomon Kotohira Tower, 1-2-8 Toranomon, Minato-ku, Tokyo, 105-0001, Japan
21. Registered office: 11-15 Seaton Place St Helier, Jersey, JE4 0QH
22. Registered office: 12 Castle Street, St Helier Jersey, JE2 3RT
23. Registered office: Lime Grove House, Green Street, St Helier, Jersey, JE1 2ST
24. Soci\u00e9t\u00e9 d\u2019investissement \u00e0 capital variable
25. Registered office: 9, Rue de Bitbourg, Luxembourg, L-1273
26. Registered office: Adam House, 5 Mid New Cultins, Edinburgh, EH11 4DU
27. Registered office: Johnstone House, 52-54 Rose Street, Aberdeen, AB10 1HA
28. Registered office: 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
29. Registered office: 850 New Burton Road, Suite 201, Dover, Delaware, 19904, USA
30. Registered office: 108 Lakeland Avenue, Dover, Kent County, DE 19901, USA
31. Registered office: 1701 Research Boulevard, Rockville, Maryland, 20850, USA
32. Registered office: Marsh Management Services, 100 Bank Street, Suite 610, Burlington, VT, 05402, USA
33. Registered office: 29 North Park Square, Ste.201, Marietta, GA, 30060, USA
34. Registered office: Corporation Trust Centre, 1209 Orange Street, Wilmington, New Castle, DE, 19801, USA
35. Registered office: 100 Quentin Roosevelt Blvd, PO Box 519, Garden City New York, 11530, USA
Year end % of equity
reporting shares held
Company name Nature of business Share class date by the group
Legal & General Group Plc\u2002Annual Report and Accounts 2022 245
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 24513.2_Financial_statements_v3.indd 245 14/03/2023 20:2114/03/2023 20:21
43 Associates and joint ventures
Associates are entities over which the group has significant influence but which it does not control. It is presumed that the group has significant
influence where it has between 20% and 50% of the voting rights in the investee unless indicated otherwise. Joint ventures are entities where the
group and other parties have joint control over their activities. The basis by which associates and joint ventures are consolidated in the group
financial statements is outlined in the basis of preparation (Note 1) .
The group has the following significant holdings classified as associates and joint ventures which have been included as financial investments, and
investments in associates and joint ventures accounted for using the equity method. The gross assets of these companies are in part funded by
borrowings which are non-recourse to the group.
Year end % of equity
Country of Accounting Investment reporting Share shares held
Company name incorporation treatment type date class by the group
245 Hammersmith Road Limited Partnership
1
England and Wales FVTPL Joint Venture 31\u2013Dec Partnership 50.0
Access Development Limited Partnership
2
Jersey Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Austin Heath Management Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Bracknell Property Unit Trust
4,5
Jersey FVTPL Joint Venture 31\u2013Dec Units 50.9
Bruntwood SciTech Limited
6
England and Wales Equity Method Joint Venture 30\u2013Sep Ordinary 50.0
CALA Evans Restoration Limited
7
Scotland Equity Method Joint Venture 30\u2013Jun Ordinary 50.0
Congenica Limited
8
England and Wales Equity Method Associate 31\u2013Dec Ordinary 7.5
Durrants Management Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
ECV Partnerships Tattenhall Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
ECV Partnerships Warwick Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Elderswell Management Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
English Cities Fund
1
England and Wales FVTPL Associate 31\u2013Dec Partnership 35.4
Gifford Lea Management Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Great Alne Park Management Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Household Capital Pty Limited
9
Australia Equity Method Associate 30\u2013Jun Ordinary 38.3
Imagine Mortgages Limited (Generation Home)
10
England and Wales FVTPL Associate 31\u2013Dec Ordinary 20.0
Kao Data Limited
11
England and Wales FVTPL Associate 31\u2013Dec Ordinary 30.0
Kensa Group Limited
12
England and Wales FVTPL Associate 31\u2013Dec Ordinary 37.6
Ledian Gardens Management Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
LGHM-VIVID JV LLP
1
England and Wales Equity Method Joint Venture 31\u2013Mar Ordinary 50.0
MoneyHub Financial Technology Limited
13
England and Wales FVTPL Associate 28\u2013Feb Ordinary 9.0
Newcastle Science Central Developments LLP
14
England and Wales FVTPL Associate 31\u2013Dec Ordinary 33.3
NTR Wind Management Limited
15
Ireland FVTPL Associate 31\u2013Mar Ordinary 25.0
Onto Holdings Limited
16
England and Wales FVTPL Associate 31\u2013Dec Ordinary 12.0
Oxford University Property Development Limited
17
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Pemberton Asset Management Holdings Limited
18
Jersey FVTPL Associate 31\u2013Dec Ordinary 40.0
Salary Direct Holdings Limited
19
Jersey FVTPL Associate 31\u2013Dec Ordinary 49.9
Senior Living (Albourne) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Aylesbury) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Boston Spa) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Broadbridge Heath) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Caddington) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Chandlers Ford) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Comberton) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
1. Registered office: One Coleman Street, London, EC2R 5AA
2. Registered office: 11-15 Seaton Place, St Helier, Jersey, JE4 0QH
3. Registered office: Unit 3 Edwalton Business Park, Landmere Lane, Edwalton, Nottingham, United Kingdom, NG12 4JL
4. Registered office: 47 Esplanade, St. Helier, Jersey, JE1 0BD
5. Bracknell Property Unit Trust is classified as a Joint Venture because the group does not control the entity
6. Registered office: Union, Albert Square, Manchester, England, M2 6LW
7. Registered office: Johnstone House, 52-54 Rose Street, Aberdeen, AB10 1HA
8. Registered office: Biodata Innovation Centre, Wellcome Genome Campus, Hinxton, Cambridge CB10 1DR
9. Registered office: Level 12/1 Nicholson St, East Melbourne VIC 3000
10. Registered office: Unit 80, Exmouth House, Pine Street, London, England, EC1R 0JH
11. Registered office: Kao Data Campus, London Road, Harlow, United Kingdom, CM17 9NA
12. Registered office: Mount Wellington, Fernsplatt, Chacewater, Truro, Cornwall, TR4 8RJ
13. Registered office: C/O Roxburgh Milkins Limited Merchants House North, Wapping Road, Bristol, United Kingdom, BS1 4RW
14. Registered office: Finance And Planning Newcastle University, King\u2019s Gate, Newcastle Upon Tyne, United Kingdom, NE1 7RU
15. Registered office: Burton Court, Burton Hall Drive, Sandyford, Dublin D18 Y2T8
16. Registered office: Ailsa House, Wedgnock Lane, Warwick, United Kingdom, CV34 5YA
17. Registered office: University Offices, Wellington Square, Oxford, United Kingdom, OX1 2JD
18. Registered office: 44 Esplanade, St Helier, Jersey JE4 9WG
19. Registered office: 35-37 New Street, St Helier, Jersey, JE2 3RA
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022246 Financial statements
13.2_Financial_statements_v3.indd 24613.2_Financial_statements_v3.indd 246 14/03/2023 20:2114/03/2023 20:21
Year end % of equity
Country of Accounting Investment reporting Share shares held
Company name incorporation treatment type date class by the group
Senior Living (Dore) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Durrants) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Freelands) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Great Leighs) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Halstead) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Hemel Hempstead) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Horndean) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Knowle) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Ledian Farm) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Liphook) Limited
20
Jersey Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Matchams) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Sonning Common) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Stamford) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Sunbury-on-Thames) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Tattenhall) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Tunbridge Wells) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Turvey) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Walkern) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living (Warwick Gates) Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Senior Living Finance 1 Limited
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Sennen Finance Designated Activity Company
21
Ireland Equity Method Joint Venture 31\u2013Dec \u2013 \u2013
Smartr365 Finance Limited
22
England and Wales FVTPL Associate 31\u2013Mar Ordinary 49.0
SOJV LLP
1
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Tattenhall Care Village LLP
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Warwick Gates LLP
3
England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
Winchburgh Developments (Holdings) Limited
23
Scotland Equity Method Joint Venture 31\u2013Dec Ordinary 50.0
1. Registered office: One Coleman Street, London, EC2R 5AA
3. Registered office: Unit 3 Edwalton Business Park, Landmere Lane, Edwalton, Nottingham, United Kingdom, NG12 4JL
20. Registered office: 3rd Floor, One The Esplanade, St Helier, Jersey, JE2 3QA
21. Registered office: 1-2 Victoria Buildings,Haddington Road, Dublin, Ireland, 4 D04 XN32
22. Registered office: 1 Queen Caroline Street, Hammersmith, London, United Kingdom, W6 9YN
23. Registered office: 1a Canal View, Winchburgh, Broxburn, West Lothian, EH52 6FE
Summarised financial information for associates and joint ventures accounted for under the equity method is shown below:
Joint Joint
Associates ventures Associates ventures
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Current assets 32 486 15 557
Non-current assets 112 1,212 184 906
Current liabilities 6 171 10 184
Non-current liabilities 113 597 27 448
(Loss)/profit from continuing operations \u2013 total (20) 99 (33) 60
(Loss)/profit from continuing operations \u2013 group\u2019s share (2) 49 (5) 30
Total comprehensive income \u2013 total (20) 99 (33) 60
Total comprehensive income \u2013 group\u2019s share (2) 49 (5) 30
The associates and joint ventures have no significant contingent liabilities to which the group is exposed. The group has no commitments to provide
funding to associates and joint ventures other than the ones included in Note 41.
During the year, the total value of Investment in associates and joint ventures accounted for using the equity method on the group\u2019s Consolidated
Balance Sheet increased to \u00a3554m (2021: \u00a3375m), reflecting a number of additions and disposals, as well as the group\u2019s share of the profits and losses
of the respective associates and joint ventures.
Legal & General Group Plc\u2002Annual Report and Accounts 2022 247
Strategic report Governance Financial statements Other information
Additional financial information
13.2_Financial_statements_v3.indd 24713.2_Financial_statements_v3.indd 247 14/03/2023 20:2114/03/2023 20:21
43 Associates and joint ventures continued
(ii) Other significant holdings
The group has the following other significant holdings which have been included as financial investments:
Year end % of equity
Country of reporting shares held
Company name incorporation date Share class by the group
Bishopsgate Long-Term Property Limited Partnership
1
Jersey 31\u2013Dec Limited Partner 25.0
1. The net asset value at 31 December 2022 was \u00a35.0m (2021: \u00a387.1m) and the registered office is 12 Castle Street, St Helier, Jersey, JE2 3RT.
44 Interests in structured entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominating factor in deciding who controls the entity,
such as when voting rights might relate to administrative tasks only and the relevant activities are directed by means of contractual arrangement. The
group has interests in investment vehicles which, depending upon their status, are classified as either consolidated or unconsolidated structured entities
as described below:
\u2022 Debt securities, consisting of traditional asset backed securities, together with securitisation and debentures and Collateralised Debt Obligations (CDOs);
\u2022 Investment funds, largely being unit trusts; and
\u2022 Specialised investment vehicles, analysed between Irish Collective Asset-management Vehicles (ICAVs), Open Ended Investment Companies (OEICs),
Soci\u00e9t\u00e9s d\u2019Investissement \u00e0 Capital Variables (SICAVs), Specialised Investment Funds (SIFs), Qualifying Investor Alternative Investment Fund (QIAIF),
Liquidity funds, Common Contractual Fund (CCF), and Property unit trusts.
All of the group\u2019s holdings in the above vehicles are subject to the terms and conditions of the respective investment vehicle\u2019s offering documentation
and are susceptible to market price risk arising from uncertainties about future values of those investment vehicles. The investment manager makes
investment decisions after extensive due diligence of the underlying investment vehicle, including consideration of its strategy and the overall quality of
the underlying investment vehicle\u2019s manager.
All of the investment vehicles in the investment portfolio are managed by portfolio managers who are compensated by the respective investment
vehicles for their services. Such compensation generally consists of an asset-based fee and a performance related incentive fee, and is reflected in the
valuation of the investment vehicles.
(i) Interests in consolidated structured entities
The group has determined that where it has control over an investment vehicle, that investment is a consolidated structured entity. The group has not
provided, and has no intention to provide, financial or other support to any other structured entities which it does not consolidate.
(ii) Interests in unconsolidated structured entities
As part of its investment activities, the group also invests in unconsolidated structured entities. As at 31 December 2022, the group\u2019s interest in such
entities reflected on the group\u2019s Consolidated Balance Sheet and classified as financial investments held at fair value through profit or loss was
\u00a319,867m (2021: \u00a321,217m). A summary of the group\u2019s interests in unconsolidated structured entities is provided below:
Financial Financial
investments investments
2022 2021
1
\u00a3m \u00a3m
Debt securities
Analysed as:
Asset backed securities 3,075 2,752
Securitisations and debentures 203 136
CDOs 66 81
Investment funds and Specialised Investment Vehicles
Analysed as:
Unit trusts 12,160 13,841
Property limited partnerships 899 710
Exchange traded funds 185 124
Liquidity funds 744 822
ICAVs 83 135
OEICs 245 333
SICAVs 260 284
QIAIF ICAVs 1 1
SIFs 1,818 1,573
Property unit trusts 128 425
Total 19,867 21,217
1. For 2021, the amounts have been updated to reflect the correct analysis of interests across the categories within Investment funds and Specialised Investment Vehicles. There is no impact
in respect of the total Financial investments related to interests in unconsolidated structured entities reflected on the group\u2019s Consolidated Balance Sheet as at 31 December 2021.
Additional financial information
continued
Legal & General Group Plc\u2002Annual Report and Accounts 2022248 Financial statements
13.2_Financial_statements_v3.indd 24813.2_Financial_statements_v3.indd 248 14/03/2023 20:2114/03/2023 20:21
Management fees received for investments that the group manages also represent interests in unconsolidated structured entities, and the group always
maintains an interest in those funds which it manages. Where the group does not manage the investments, its maximum exposure to loss is the carrying
amount in the group Consolidated Balance Sheet. Where the group does manage these investments, the maximum exposure is the underlying balance
sheet value, together with future management fees.
The table below shows the assets under management of those structured entities which the group manages, together with investment management
fees received from external parties.
Investment Investment
management management
AUM fees AUM fees
2022 2022 2021 2021
\u00a3m \u00a3m \u00a3m \u00a3m
Investment funds 86,037 138 95,889 168
Specialised Investment Vehicles 23,325 60 26,687 60
Analysed as:
OEICs 174 \u2013 492 1
SICAVs 891 2 1,074 2
Property limited partnerships 4,305 21 5,178 27
ETF 7,639 25 8,771 21
ICAV 7,750 8 10,207 8
QIAIF 715 1 395 \u2013
Liquidity funds 270 1 338 1
CCF 1,581 2 232 \u2013
Total 109,362 198 122,576 228
No significant sponsorship has been provided to any of the above entities. The group has not, and has no intention, to provide any significant financial or
other support to any other structured entities which it does not consolidate.
In addition to the above, the group has an exposure of \u00a3188m (2021: \u00a3300m) related to special purpose vehicles classified as joint ventures and
accounted for using the equity method, with a carrying value on the group Consolidated Balance Sheet as at 31 December 2022 of \u00a3nil (2021: \u00a3nil).
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Legal & General Group Plc, a public limited company incorporated and domiciled in England and Wales, operates across four broad business areas of
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(i) Significant accounting policies
The group financial statements have been prepared in accordance with UK-adopted international accounting standards, comprising International
Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and
related interpretations issued by the IFRS Interpretations Committee. Endorsement is granted by the UK Endorsement Board (UKEB). The group financial
statements have been prepared under the historical cost convention, as modified by the revaluation of investment property, available-for-sale financial
assets, and certain financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
The group has selected accounting policies which state fairly its financial position, financial performance and cash flows for a reporting period. The
accounting policies have been consistently applied to all years presented unless otherwise stated. Accounting policies that relate specifically to a balance
or transaction are presented above the relevant numerical disclosure.
Financial assets and financial liabilities are disclosed gross in the Consolidated Balance Sheet unless a legally enforceable right of offset exists and there
is an intention to settle recognised amounts on a net basis. Income and expenses are not offset in the Consolidated Income Statement unless required
or permitted by any accounting standard or International Financial Reporting Interpretations Committee (IFRIC) interpretation, as detailed in the
applicable accounting policies of the group.
(iii) New standards, interpretations and amendments to published standards that have been adopted by the group
The group has applied the following standards and amendments for the first time in its annual reporting period commencing 1 January 2022, which
did not give rise to a material impact on the group\u2019s consolidated financial statements.
Annual Improvements to IFRS Standards 2018-2020
These amendments, issued in May 2020, make minor amendments to IFRS 1 \u2018First-time Adoption of IFRS\u2019, IFRS 9 \u2018Financial instruments\u2019, IAS 41
\u2018Agriculture\u2019 and the illustrative examples accompanying IFRS 16 \u2018Leases\u2019.
Amendments to IAS 16 \u2013 Property, plant and equipment
These amendments, issued in May 2020, prohibit a company from deducting from the cost of property, plant and equipment amounts received from
selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and
related cost in profit or loss.
Amendments to IAS 37 \u2013 Provisions, contingent liabilities and contingent assets
These amendments, issued in May 2020, specify which costs a company includes when assessing whether a contract will be loss-making.
Amendments to IFRS 3 \u2013 Business Combinations
These amendments, issued in May 2020, update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the
accounting requirements for business combinations.
1. Section 5.01 of the Full year results in the 2022 Preliminary Management Report is unaudited.
(iv) Standards, interpretations and amendments to published standards which are not yet effective IFRS 17 \u2013 Insurance Contracts and IFRS 9 \u2013 Financial Instruments The group will apply IFRS 17, \u2018Insurance Contracts\u2019 and IFRS 9, \u2018Financial Instruments\u2019 for the first time on 1 January 2023. These standards will bring significant changes to the accounting for insurance and reinsurance contracts and financial instruments and are expected to have a material impact on the group\u2019s financial statements in the period of initial application. (a) Introduction IFRS 17, \u2018Insurance Contracts\u2019 IFRS 17, \u2018Insurance Contracts\u2019 was originally issued in May 2017 by the IASB, and subsequent amendments were issued in June 2020. The standard is effective for annual periods beginning on or after 1 January 2023 following endorsement for use in the UK in May 2022. The standard, which replaces IFRS 4, \u2018Insurance Contracts\u2019, will be applied retrospectively, subject to the transitional options provided for in the standard and provides a comprehensive approach for accounting for insurance contracts including their measurement, income statement presentation and disclosure. The key general principles of IFRS 17 are that an entity: \u2022 Identifies insurance contracts as those under which the entity accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder; \u2022 Separates specified embedded derivatives, distinct investment components and distinct non-insurance goods or services from insurance contracts and accounts for them in accordance with other accounting standards; \u2022 Aggregates the insurance contracts into groups it will recognise and measure (by portfolio, year of inception and profitability); \u2022 Recognises and measures groups of insurance contracts at: \u2013 a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all available information about the fulfilment cash flows; and \u2013 an amount representing the unearned profit in the group of contracts (the contractual service margin or CSM); \u2022 Recognises profit from a group of insurance contracts over the period the group provides insurance coverage. If a group of contracts is expected to be onerous (i.e. loss making) over the remaining coverage period, a loss is recognised immediately; and \u2022 Presents insurance service results (including insurance revenue) separately from insurance finance income or expenses with an accounting policy choice to disaggregate insurance income and expense for the period between profit or loss and other comprehensive income. IFRS 9, \u2018Financial Instruments\u2019 In July 2014, the IASB issued IFRS 9, \u2018Financial Instruments\u2019 which was effective for annual periods beginning on or after 1 January 2018. The standard replaced IAS 39, \u2018Financial Instruments: Recognition and Measurement\u2019. It includes new principles around classification and measurement of financial instruments, introduces an impairment model based on expected credit losses (replacing the current model based on incurred losses) and new requirements on hedge accounting. The IASB subsequently issued \u2018Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts\u2019 which allowed entities which meet certain requirements to defer their implementation of IFRS 9 until adoption of IFRS 17, \u2018Insurance Contracts\u2019 or 1 January 2021, whichever is the earlier. In June 2020, the IASB agreed to extend the temporary exemption in IFRS 4 from applying IFRS 9 to annual reporting periods beginning on or after 1 January 2023. The group has qualified for, and has made use of this deferral option, and will therefore apply IFRS 9 for the first time on 1 January 2023, with a restatement of 2022 comparatives. IFRS 9 classifies financial assets into the following three categories: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The classification of financial assets is based on the entity\u2019s business model for managing them, as well as their contractual cash flow characteristics. With the exception of financial assets measured under fair value through profit or loss (FVTPL), an expected credit loss impairment model applies to all financial assets in scope (including lease receivables and contract assets). The new impairment model requires utilising not only past events and current conditions but also reasonable and supportable forward-looking information, in order to assess the credit risk profiles of those financial assets in scope. Most requirements around financial liabilities in IAS 39 have been retained by IFRS 9, and hedge accounting requirements have been revised by replacing some of the prescriptive rules in IAS 39 with more principle-based requirements, to better align with the entity\u2019s risk management activities. 1 Basis of preparation continued (b) Estimated impacts of the adoption of IFRS 17 and IFRS 9 The group has assessed the estimated impact that the initial application of IFRS 17 and IFRS 9 will have on its consolidated financial statements at the transition date of 1 January 2022. The total adjustment to the group\u2019s equity attributable to owners of the parent is estimated to be a reduction of \u00a35.5bn. The estimated impacts on the key line items in the group\u2019s consolidated balance sheet are set out below: 31 December 2021 (as reported) Adjustments due to adoption of IFRS 9 Adjustments due to adoption of IFRS17 1 January 2022 (restated) Balance Sheet item \u00a3bn \u00a3bn \u00a3bn \u00a3bn Financial investments 538.4 (0.6) \u2013 537.8 Net insurance contract liabilities 1 (82.9) \u2013 (6.2) (89.1) Net deferred tax (liabilities)/assets (0.2) 0.1 1.3 1.2 Other (444.8) \u2013 (0.1) (444.9) Equity attributable to owners of the parent 10.5 (0.5) (5.0) 5.0 1. Net insurance contract liabilities reflect insurance contract assets and liabilities, net of reinsurance contracts. While the adoption of these accounting standards will have an impact on the timing and profile of profit recognition, as communicated at the group\u2019s IFRS 17 investor and analyst event on 29 November 2022, the underlying economics and cash generation of the group\u2019s businesses do not change. The financial impacts noted above will be reflected, where appropriate, in the interim financial statements for the period ending 30 June 2023, and in the group\u2019s Annual Report and Accounts for the year ending 31 December 2023. The financial impacts relating to the periods ending 30 June 2022 and 31 December 2022 have not yet been finalised and are not reasonably estimable for the purpose of inclusion in these consolidated financial statements. (i) Adjustments due to the adoption of IFRS 17 The different timing of profit recognition will result in an increase in liabilities, and therefore decrease in equity attributable to owners of the parent on adoption of IFRS 17. This reflects that a portion of profits previously recognised and accumulated in equity under IFRS 4 will be included in the measurement of the liabilities under IFRS 17. This increase in liabilities can be attributed to the following: Changes from IFRS 4 Estimated impact on net insurance contract liabilities on transition to IFRS 17 \u00a3bn Remeasurement of liabilities: the IFRS 17 cash flows are best estimate and exclude all prudent margins included in the IFRS 4 liabilities. Removal of these margins coupled with other changes to the insurance contract measurement, including discount rates and the exclusion of non-attributable expenses, results in a lower best estimate liability. (7.5) Creation of a risk adjustment \u2013 IFRS 17 incorporates a specific risk adjustment for non-financial risk (which is lower than the prudent margins included within the IFRS 4 liabilities). 2.5 Creation of CSM: determined using the transition approaches described below and reflecting the unearned profit of these contracts. Under IFRS 4 profit could be recognised at inception. 11.2 Total 6.2 (ii) Adjustments due to the adoption of IFRS 9 Upon transition to IFRS 9 on 1 January 2022, the group\u2019s equity attributable to owners of the parent will decrease by c.\u00a30.6bn (before tax). This predominantly reflects the remeasurement of assets following the reclassification of a proportion of financial investments from fair value through profit or loss to amortised cost, in order to better align the accounting treatment of assets that are backing the CSM component of insurance contract liabilities, which is measured at locked-in discount rates under IFRS 17. The application of the expected credit loss impairment requirements does not have a material impact on the group\u2019s equity at the point of transition. (c) Significant accounting policies \u2013 IFRS 17, \u2018Insurance Contracts\u2019 Long term insurance contracts \u2013 initial measurement Insurance contracts are contracts which transfer significant insurance risk to the insurer at the inception of the contract. This is the case if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, other than a scenario which lacks commercial substance. Such contracts remain insurance contracts until all rights and obligations are extinguished or expire. Contracts can be reclassified as insurance contracts after inception if insurance risk becomes significant. Any contracts not considered to be insurance contracts under IFRS 17 are classified as investment contracts and are measured under IFRS 9. The scope of IFRS 17 is very closely aligned to IFRS 4. All of the group\u2019s in scope insurance contracts are accounted for under the general measurement model which measures a group of insurance contracts as the total of: \u2022 fulfilment cash flows; and \u2022 a CSM representing the unearned profit the group will recognise as it provides services under the insurance contract. Fulfilment cash flows Fulfilment cash flows comprise unbiased and probability-weighted estimates of future cash flows, discounted to present value to reflect the time value of money and financial risks, plus a risk adjustment for non-financial risk. The group\u2019s objective in estimating future cash flows is to determine the expected value, or the probability weighted mean, of the full range of possible outcomes, considering all reasonable and supportable information available at the reporting date without undue cost or effort. The group estimates future cash flows considering a range of scenarios which have commercial substance and give a good representation of possible outcomes. The cash flows from each scenario are probability-weighted and discounted using current assumptions. When estimating future cash flows, the group includes all cash flows that are within the contract boundary. The contract boundary for the group\u2019s contracts is very closely aligned with that applied under IFRS 4. The cash flows include: \u2022 premiums and related cash flows; \u2022 claims and benefits, including reported claims not yet paid, incurred claims not yet reported and expected future claims; \u2022 investment management costs incurred in the provision of an investment return service or to enhance the benefits of an insurance contract; \u2022 payments to policyholders resulting from embedded surrender value options; \u2022 an allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs; \u2022 claims handling costs; \u2022 policy administration and maintenance costs, including recurring commissions that are expected to be paid to intermediaries; \u2022 an allocation of fixed and variable overheads directly attributable to fulfilling insurance contracts; and \u2022 transaction-based taxes. The group incorporates, in an unbiased way, all reasonable and supportable information available without undue cost or effort about the amount, timing and uncertainty of those future cash flows. The group estimates the probabilities and amounts of future payments under existing contracts based on information obtained, including: \u2022 information about claims already reported by policyholders; \u2022 other information about the known or estimated characteristics of the insurance contracts; \u2022 historical data about the group\u2019s own experience, supplemented when necessary, with data from other sources. Historical data is adjusted to reflect current conditions; and \u2022 current pricing information, when available. The measurement of fulfilment cash flows-includes insurance acquisition cash flows which are allocated as a portion of premium to profit or loss (through insurance revenue) over the period of the contract. Risk adjustment The risk adjustment for non-financial risk for a group of insurance contracts reflects the compensation that the group would require for bearing uncertainty about the amount and timing of the cash flows that arises from non-financial risk after diversification. We have calibrated the group\u2019s risk adjustment using a Value at Risk (VAR) methodology. The total group risk adjustment at transition was \u00a32.5bn. Discounting The insurance contract fulfilment cash flows are discounted at rates that reflect the characteristics of the insurance contract liabilities. These have been determined using the top-down approach, starting from an appropriate asset portfolio with deductions to remove risks in the assets that are not present in the insurance liabilities. As is the case under IFRS 4, the discount rate is a key determinant of the measurement of the insurance liability, particularly for annuity business. At transition, the average credit default deduction was c.41bps compared with c.43bps under IFRS 4. Contractual service margin The group\u2019s CSM is a component of the asset or liability for the group of insurance contracts that represents the unearned profit the group will recognise as it provides services in the future. The group measures the CSM on initial recognition at an amount that, unless the group of contracts is onerous, results in no income or expenses arising from: \u2022 initial recognition of the fulfilment cash flows; \u2022 any cash flows arising from the contracts in the group at that date; \u2022 the derecognition at the date of initial recognition of: \u2013 any asset for insurance acquisition cash flows; and \u2013 any other asset or liability previously recognised related to the group of insurance contracts. Aggregation The level of aggregation determines the unit of account at which IFRS 17 calculations are performed. This is determined firstly by dividing the business written into portfolios. Portfolios comprise groups of contracts with similar risks which are managed together. Portfolios are further divided based on expected profitability at inception into three categories: onerous contracts, contracts with no significant risk of subsequently becoming onerous, and the remainder. IFRS 17 also requires that no group for level of aggregation purposes may contain contracts issued more than one year apart. 1 Basis of preparation continued Onerous contracts For groups of contracts assessed as onerous, the group recognises a loss in profit or loss for the net outflow, resulting in the carrying amount of the liability for the group being equal to the fulfilment cash flows and the CSM of the group being zero. A loss component is established by the group for the liability for remaining coverage for an onerous group, which represents the losses recognised. Long term insurance contracts \u2013 subsequent measurement The group measures the carrying amount of a group of insurance contracts at the end of each reporting period as the sum of: (i) the liability for remaining coverage comprising fulfilment cash flows related to future service allocated to the group at that date and the CSM of the group at that date; and (ii) the liability for incurred claims for the group reflecting the fulfilment cash flows related to past service allocated to the group at that date. Contractual service margin \u2013 measurement The CSM at the end of the reporting period represents the profit in the group of insurance contracts that has not yet been recognised in profit or loss, because it relates to future service to be provided. For a group of insurance contracts the carrying amount of the CSM of that group at the end of the reporting period equals the carrying amount at the beginning of the reporting period adjusted, as follows: \u2022 the effect of any new contracts added; \u2022 interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates at initial recognition; \u2022 the changes in fulfilment cash flows relating to future service, except to the extent that: \u2013 such increases in the fulfilment cash flows exceed the current carrying amount of the CSM, giving rise to a loss; or \u2013 such decreases in the fulfilment cash flows are allocated to the loss component of the liability for remaining coverage; \u2022 the amount recognised as insurance revenue because of the transfer of services in the period, determined by allocation of the contractual service margin at the end of the period over the current and remaining coverage period; and \u2022 the effect of any currency exchange differences on the CSM. The changes in fulfilment cash flows relating to future service that adjust the CSM comprise of: \u2013 experience adjustments that arise from the difference between the premium receipts (net of refunds) and any related cash flows such as insurance acquisition cash flows and insurance premium taxes and the estimate, at the beginning of the period, of the amounts expected. Differences related to premiums received (or due) in respect of current or past services are recognised immediately in profit or loss while differences related to premiums received (or due) for future services are adjusted against the CSM; \u2013 changes in estimates of the present value of future cash flows in the liability for remaining coverage, except those relating to the time value of money and changes in financial risk (which are recognised in the statement of profit or loss and other comprehensive income rather than adjusting the CSM); \u2013 differences between any investment component expected to become payable in the period and the actual investment component that becomes payable in the period; and \u2013 changes in the risk adjustment for non-financial risk that relate to future service. Adjustments to the CSM noted above are measured at discount rates that reflect the characteristics of the cash flows of the group of insurance contracts at initial recognition (i.e. the weighted average of the rates applicable at the date of initial recognition of contracts that joined a group over a 12-month period). Onerous contracts Groups of contracts that were not onerous at initial recognition can also subsequently become onerous if assumptions and experience changes. The group establishes a loss component for any onerous group depicting the future losses recognised. The loss component is released based on a systematic allocation of the subsequent changes in the fulfilment cash flows to: (i) the loss component; and (ii) the liability for remaining coverage excluding the loss component. The loss component is also updated for subsequent changes in estimates of the fulfilment cash flows related to future service. The systematic allocation of subsequent changes to the loss component results in the total amounts allocated to the loss component being equal to zero by the end of the coverage period of a group of contracts (since the loss component will have materialised in the form of incurred claims). The loss component ensures that over the duration of the contract, the correct amounts are recognised as insurance revenue and insurance service expenses. Contractual service margin \u2013 recognition The amount of contractual service margin recognised in the income statement for a group of insurance contracts reflects the insurance contract services provided. The proportion of the CSM earned is calculated as the amount of coverage units provided in the period divided by the sum of all the future and current period coverage units. The group has elected to discount the future coverage units in this calculation. The table below indicates the main insurance contracts services provided under the group\u2019s insurance contracts and selected coverage unit(s) used to measure those services. Insurance contract Insurance service Coverage unit(s) Immediate annuity Payment of insurance claims Expected annual claims payments Deferred annuity \u2022 Payment of insurance claims (payment phase) \u2022 Investment return service (deferral phase) \u2022 Lump sum death benefits (deferral phase) \u2022 Expected annual claims payments \u2022 Expected investment return on backing assets \u2022 Sum assured Longevity swaps Payment of floating leg of swap Expected annual floating leg payments Retail Protection Potential mortality or morbidity claims Sum assured Group Protection Potential mortality or morbidity claims Sum assured Where a specific unit of account contains a mixture of services, and therefore coverage units, it is necessary to weight the coverage units so that the resulting profile of CSM release reflects the overall package of benefits provided. This is particularly pertinent to units of account incorporating a combination of immediate and deferred annuities. Under IFRS 17, deferred annuities usually provide multiple services, split between the two phases of benefit provision (the deferral phase and the payment phase). Significant judgement is therefore required to combine the different coverage units so that they fairly reflect the services provided. The weighting between the deferral phase and the payment phase coverage units is calculated so that the services provided in the deferral phase reflect the investment return provided and the probability weighted delivery of any lump sum death benefits, both adjusted to target that all of the CSM is earned in the deferral phase for all contracts which do not enter the payment phase either through transfer out, withdrawal of funds or death. Earning the CSM over the coverage period will slow down profit recognition for annuities in comparison to IFRS 4 which allowed the recognition of profit on inception and more closely linked revenue recognition to risk release rather than the provision of service. Investment components Investment components will not be included in insurance revenue and insurance service expenses under IFRS 17. As a result, revenue from some annuity and universal life contracts will be reduced in comparison with the premium recognised under IFRS 4. The group will identify the investment component of a contract by determining the amount that it would be required to repay to the policyholder in all scenarios with commercial substance. Insurance finance income and expense IFRS 17 requires an accounting policy decision as to whether to recognise all finance income or expense in profit or loss, or whether to disaggregate the income or expense that relates to changes in financial assumptions into other comprehensive income. All finance income and expense will be included in profit or loss except for protection business where this will be disaggregated. Reinsurance contracts held The measurement of reinsurance contracts held follows the same principles as those for insurance contracts issued, with the exception of the following: \u2022 measurement of the cash flows includes an allowance on a probability-weighted basis for the effect of any non-performance by the reinsurers, including the effects of collateral and losses from disputes; \u2022 the group determines the risk adjustment for non-financial risk so that it represents the amount of risk being transferred to the reinsurer; \u2022 both day 1 gains and day 1 losses are not recognised at initial recognition in the statement of financial position but are deferred into CSM and released to profit or loss as the reinsurer renders services, except for any portion of a day 1 loss that relates to events before initial recognition; \u2022 if the reinsurance contract is recognised prior to a loss-making underlying contract, the reinsurance CSM can be adjusted to offset a portion of the inception loss (the loss recovery component); and \u2022 subsequent changes in the fulfilment cash flows are recognised in profit or loss if the related changes arising from the underlying ceded contracts are recognised in profit or loss. Alternatively, changes in the fulfilment cash flows adjust the CSM. Transition On transition to IFRS 17, the group has applied the fully retrospective approach unless impracticable. The full retrospective approach requires the group to: \u2022 identify, recognise and measure each group of insurance and reinsurance contracts as if IFRS 17 had always applied; \u2022 derecognise any existing balances that would not exist had IFRS 17 always applied; and \u2022 recognise any resulting net difference in equity. If it was impracticable to apply a full retrospective approach to a group of contracts then the group has chosen between the modified retrospective approach and the fair value approach. If the group could not obtain reasonable and supportable information necessary to apply the modified retrospective approach, then the fair value approach has been chosen. 1 Basis of preparation continued The group has applied the following transition approaches to its material insurance contract portfolios on transition to IFRS 17, by year of issue: Transition Approach Annuities UK Protection US Protection Full retrospective 2021 2021 2021 Modified retrospective 2016-2020 2012-2020 2011-2020 Fair value Pre-2016 Pre-2012 Pre-2011 Full retrospective approach The full retrospective approach has been determined to be impracticable where the effects of retrospective application are not determinable because information required has not been collected (or not with sufficient granularity), application would require the application of hindsight, or information is unavailable because of system migrations, data retention requirements or other reasons. Specific examples include: \u2022 historic calibration of IFRS 17 specific judgements, such as the scale of the risk adjustment; \u2022 expectations about a contract\u2019s profitability and risks of becoming onerous required for identifying groups of contracts; \u2022 information about historical cash flows and discount rates required for determining the estimates of cash flows on initial recognition and their subsequent changes on a retrospective basis; \u2022 information required to allocate fixed and variable overheads to groups of contracts, because the group\u2019s current accounting policies do not require such information; and \u2022 information about certain changes in assumptions and estimates because they were not documented on an ongoing basis. Modified retrospective approach The objective of the modified retrospective approach is to achieve the closest outcome to retrospective application possible using reasonable and supportable information available without undue cost or effort. The only modification applied by the group is that for some groups of contracts issued before 2020, the risk adjustment for non-financial risk on initial recognition will be determined by adjusting the amount at 1 January 2022 for the expected release of risk before that date. The expected release will be determined with reference to the release of risk of similar contracts that the group issued in 2022. This modification has been used to avoid the application of hindsight to the calibration of the risk adjustment in prior periods. Fair value approach The group has applied the fair value approach on transition for certain groups of contracts as, prior to transition, it grouped contracts from multiple cohorts and years into a single unit for accounting purposes. Obtaining reasonable and supportable information to apply the full retrospective approach was impracticable without undue cost or effort. The group has determined the CSM of the liability for remaining coverage at the transition date, as the difference between the fair value of the group of insurance contracts and the fulfilment cash flows measured at that date. In determining fair value, the group has applied the requirements of IFRS 13, \u2018Fair Value Measurement\u2019, except for the demand deposit floor requirement. The fair value attributed to the in-scope annuity business is calculated with reference to a price generated using the group\u2019s pricing models and pricing assumptions at the transition date. This incorporates an expected internal rate of return that has been validated against relevant market transactions. The group has aggregated contracts issued more than one year apart in determining groups of insurance contracts under the fair value approach at transition. The group did not have reasonable and supportable information to aggregate groups into those including only contracts issued within one year. For portfolios of protection contracts, the group has elected to disaggregate insurance finance income or expenses between amounts included in profit or loss and amounts included in other comprehensive income. For these portfolios, the cumulative amount of insurance finance income or expense recognised in other comprehensive income at the transition date and has been reset to zero in line with the provisions of the standard. (viii) Product classification The group\u2019s products are classified for accounting purposes as either insurance or investment contracts. The basis of accounting for these products is outlined in Notes 20 and 21 respectively. The following table summarises the classification of the group\u2019s significant types of non-participating insurance and investment contracts as well as investment products as described in Note 6 for each applicable reportable segment. Reportable segment Non-participating insurance contracts Non-participating investment contracts and investment products LGRI \u2022 Pension risk transfers \u2022 Longevity insurance \u2022 Assured payment policies Retail \u2022 UK Retail protection \u2022 UK Group protection \u2022 US protection \u2022 US Universal life \u2022 Individual annuities \u2022 Lifetime Care Plan \u2022 Lifetime mortgages \u2022 Fixed term individual annuities \u2022 Retirement interest only mortgages \u2022 Workplace savings LGIM \u2022 Institutional Pension \u2022 Segregated investment management mandates \u2022 Collective Investment Schemes (ix) Fiduciary activities Assets associated with fiduciary activities and the income arising from those assets, together with associated commitments to return such assets to customers, are not included in these financial statements. Where the group acts in a fiduciary capacity, for instance as a trustee or agent, it has no contractual rights over the assets concerned. (x) Foreign exchange and exchange rates Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. The functional currency of the group\u2019s foreign operations is the currency of the primary economic environment in which the entity operates. The assets and liabilities of all of the group\u2019s foreign operations are translated into sterling, the group\u2019s presentation currency, at the closing rate at the date of the Consolidated Balance Sheet. Income and expenses are translated at average exchange rates. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to a separate component of shareholders\u2019 equity. Foreign exchange gains and losses are recognised in the Consolidated Income Statement, except when recognised in equity as qualifying cash flow or net investment hedges. The closing exchange rates at 31 December 2022 were 1.21 United States dollar and 1.13 euro (31 December 2021: 1.35 United States dollar and 1.19 euro). The average exchange rates for the year ended 31 December 2022 were 1.24 United States dollar and 1.17 euro (31 December 2021: 1.38 United States dollar and 1.16 euro). Interim dividends on ordinary shares are deducted from retained earnings in the period in which they are paid. Final dividends on ordinary shares are recognised as a liability in the period in which they have been approved by shareholders of the company. Earnings per share is a measure of the portion of the group\u2019s profit allocated to each outstanding share. It is calculated by dividing net income attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares. For this purpose, net income is defined as the profit after tax, attributable to equity holders of the company, derived from continuing operations. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all dilutive potential ordinary shares, such as share options granted to employees. Potential or contingent share issuances are treated as dilutive when their conversion to shares would decrease net earnings per share. Other intangible assets mainly consist of capitalised software costs and intangible assets acquired as part of a business combination (customer relationships and brand). Where software costs are separately identifiable and measurable, they are capitalised at cost and amortised over their expected useful life on a straight line basis. Costs incurred to internally develop software are only capitalised if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the group intends to and has sufficient resources to complete such development and to use or sell the asset. Otherwise, such costs are recognised in profit or loss as incurred. Intangible assets acquired via business combinations are recognised at fair value and are subsequently amortised on a straight line basis over their estimated useful life. The brand balance acquired by the group is deemed to have an indefinite useful life and is therefore not amortised. The estimated amortisation periods for intangible assets with finite useful lives are as follows: \u2022 IT development and software 3-10 years \u2022 Customer relationship 3 years Amortisation methods, useful lives and any expected residual values are reviewed at each reporting date and adjusted if appropriate. The amortisation charge for the year is recognised in the Consolidated Income Statement in Other expenses (see Note 3). For impairment testing, other intangible assets are tested either individually or at the cash-generating unit level. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets with finite useful lives are tested when there are indications of impairment. The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and its value in use. Any impairments are recognised in Other expenses (see Note 3) The group holds financial investments and investment property to back insurance contracts on behalf of policyholders and as group capital. The group classifies its financial investments on initial recognition as held for trading (HFT), designated at fair value through profit or loss (FVTPL), available-for-sale (AFS) or loans and receivables. Initial recognition of financial investments is on the trade date. In general, the group\u2019s policy is to measure investments at FVTPL. Financial investments held by the group are designated as FVTPL as their performance is evaluated on a total return basis, consistent with asset performance reporting to the Group Financial Risk Committee and the group\u2019s investment strategy. Assets designated as FVTPL include debt securities (including lifetime and retirement interest only mortgages), equity instruments which would otherwise have been classified as AFS, and reverse repurchase agreements within loans which would otherwise be designated at amortised cost. Assets backing non-participating policyholder liabilities are designated as FVTPL. The group\u2019s non-participating investment contract liabilities are measured on the basis of current information and are designated as FVTPL. All derivatives other than those designated as hedges are classified as HFT. Financial investments classified as HFT and designated at FVTPL are measured at fair value with gains and losses reflected in the Consolidated Income Statement. Transaction costs are expensed as incurred. Certain other financial investments classified as AFS are measured at fair value with unrealised gains and losses recognised in a separate reserve within equity. Realised gains and losses, impairment losses, dividends, interest and foreign exchange movements on non-equity instruments are recognised in the Consolidated Income Statement. Directly attributable transaction costs are included in the initial measurement of the investment. Financial investments classified as loans are either designated at FVTPL, or initially measured at fair value plus transaction costs, and subsequently measured at amortised cost using the effective interest method. The designated at FVTPL classification currently only applies to reverse repurchase agreements. Financial investments are recognised when the group becomes a party to the contractual provisions of the instrument. Financial investments are derecognised only when the contractual rights to the cash flows from the investment expire, or when the group transfers substantially all the risks and rewards of ownership to another entity. Financial assets, other than those measured at FVTPL, are assessed for impairment at each balance sheet date. They are impaired where there is objective evidence that, as a result of one or more events after initial recognition of the financial asset, the estimated future cash flows have been affected. Investment property is comprised of land and buildings which are held for long-term rental yields and capital growth, as well as right-of-use assets of the same nature. It is carried at fair value, with changes in fair value recognised in the Consolidated Income Statement within investment return. Investment property in the UK is valued at least bi-annually by external chartered surveyors at open market values in accordance with the \u2018Appraisal and Valuation Manual\u2019 of The Royal Institution of Chartered Surveyors or using internal valuations and estimates during the intervening period. Outside the UK, valuations are produced in conjunction with external qualified professional valuers in the countries concerned. In the event of a material change in market conditions between the valuation date and balance sheet date, an internal valuation is performed and adjustments made to reflect any material changes in fair value. Right-of-use investment property assets relate to long-leasehold interests in land held solely for the purposes of the related investment property asset. The group applies the fair value model to these interests as they meet the definition of investment property under IAS 40, \u2018Investment Property\u2019. The group receives and pledges collateral in the form of cash or non-cash assets in respect of various transactions, in order to reduce the credit risk of these transactions. The amount and type of collateral required where the group receives collateral depends on an assessment of the credit risk of the counterparty. Collateral received in the form of cash, where the group has contractual rights to receive the cash flows generated, is recognised as an asset in the Consolidated Balance Sheet with a corresponding liability for its repayment. Non-cash collateral received is not recognised in the Consolidated Balance Sheet unless the counterparty defaults on its obligations under the relevant agreement. Non-cash collateral pledged where the group retains the contractual rights to receive the cash flows generated is not derecognised from the Consolidated Balance Sheet, unless the group defaults on its obligations under the relevant agreement. Cash collateral pledged, where the counterparty has contractual rights to receive the cash flows generated, is derecognised from the Consolidated Balance Sheet and a corresponding receivable is recognised for its return. As required by the amendments to IFRS 4 \u2018Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts\u2019, the disclosures below are presented in order to provide users of the financial statements with information which allows them to compare financial assets when IFRS 9 is not applied with those of entities applying IFRS 9. All entities within the group whose activities are not primarily insurance related and which prepare financial statements on an IFRS basis (including UK entities qualifying for disclosure exemptions under FRS 101, \u2018Reduced Disclosure Framework\u2019) implemented IFRS 9 in 2018. The financial statements of these entities made available through Companies House. The group uses derivatives as a component of efficient portfolio management. This includes, but is not limited to, hedging economic exposure to foreign currencies, interest rates, inflation and credit risks. The group uses hedge accounting, provided the prescribed criteria in IAS 39, \u2018Financial instruments: Recognition and measurement\u2019 are met, to recognise the offsetting effects of changes in the fair value or cash flow of the derivative instrument and the hedged item. The principal uses of hedge accounting are to: (i) Defer in equity the changes in the fair value of derivatives designated as the hedge of a future cash flow attributable to a recognised asset or liability, a highly probable forecast transaction, or a firm commitment until the period in which the future transaction affects profit or loss or is no longer expected to occur; (ii) Hedge the exposure to fair value movements of a recognised asset or liability or an unrecognised firm commitment, or a component of any such item, that is attributable to a particular risk and could affect the Consolidated Income Statement; and (iii) Hedge the exposure to the currency risk associated with a net investment in a foreign operation. The relationship between the hedging instrument and the hedged item, together with the risk management objective and strategy for undertaking the hedge transaction, are documented at the inception of the transaction. The effectiveness of the hedge is documented and monitored on an ongoing basis. Hedge accounting is only applied for highly effective hedges (between 80% and 125% effectiveness) with any ineffective portion of the gain or loss recognised in the Consolidated Income Statement in the current year. Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments which do not qualify for hedge accounting are recognised immediately in the Consolidated Income Statement. Where the risks and characteristics of derivatives embedded in other contracts are not closely related to those of the host contract and the whole contract is not carried at fair value, the derivative is separated from that host contract and measured at fair value, with fair value movements reflected within investment return, unless the embedded derivative itself meets the definition of an insurance contract. Cash inflows and outflows are presented on a net basis where the group is required to settle net or has a legally enforceable right of offset and the intention is to settle on a net basis. The group leases certain investment properties to third parties. Under these agreements, substantially all the risks and reward incidental to ownership are transferred to the lessee, and therefore the contracts have been classified as finance leases. At the lease commencement date, the group derecognises the investment property asset and recognises a receivable asset on its balance sheet to reflect the net investment in the lease, equal to the present value of the lease payments. The group recognises finance income over the lease term to reflect the rate of return on the net investment in the lease. Cash and cash equivalents include cash in hand, deposits held at call with banks, treasury bills and other short-term highly liquid investments with maturities of three months or less from the date of acquisition. Insurance contracts are contracts which transfer significant insurance risk to the insurer at the inception of the contract. This is the case if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, other than a scenario which lacks commercial substance. Such contracts remain insurance contracts until all rights and obligations are extinguished or expire. Contracts can be reclassified as insurance contracts after inception if insurance risk becomes significant. Any contracts not considered to be insurance contracts under IFRS are classified as investment contracts. Long-term insurance Death claims are accounted for on notification of death. Surrenders for non-linked policies are accounted for when payment is made. Critical illness claims are accounted for when admitted. All other long-term claims and surrenders are accounted for when payment is due. Claims payable include the direct costs of settlement. The change in the insurance liability reflects the reduction in liabilities as claims are paid throughout the year, offset by liabilities arising from new business. The movement also reflects changes in expectations of future claims payments and expenses, plus changes in valuation interest rates, as set out in Note 18. Under current IFRS requirements, insurance contract liabilities are measured using local Generally Accepted Accounting Principles (GAAP), as permitted by IFRS 4, \u2018Insurance Contracts\u2019. For non-participating insurance contracts, the liabilities are calculated on the basis of current information using the gross premium valuation method. This brings into account the full premiums receivable under contracts written, having prudent regard to expected lapses and surrenders, estimated renewal and maintenance costs, and contractually guaranteed benefits. For unit linked insurance contract liabilities the provision is based on the fund value together with an allowance for any excess of future expenses over charges where appropriate. Reinsurance The group\u2019s insurance subsidiaries cede insurance premiums and risk in the normal course of business in order to limit the potential for losses and to provide financing. Outwards reinsurance premiums are accounted for in the same accounting period as the related premiums for the direct or inwards reinsurance business being reinsured. Reinsurance assets include balances due from reinsurers for paid and unpaid losses and loss adjustment expenses, ceded unearned premiums and ceded future life policy benefits. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. An impairment occurs when there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the group may not receive all outstanding amounts due, and the event has a reliably measurable impact on the amounts that it will receive from the reinsurer. If a reinsurance asset is impaired, the group reduces its carrying amount accordingly and recognises that impairment loss in the Consolidated Income Statement. Reinsurance is recorded as an asset in the Consolidated Balance Sheet unless a right of offset exists, in which case the associated liabilities are reduced commensurately. Contracts with reinsurers are assessed to determine whether they contain significant insurance risk. Contracts that do not give rise to significant transfer of insurance risk to the reinsurer are considered to be financial reinsurance and are accounted for and disclosed in a manner consistent with financial instruments. Non-participating investment contract liabilities are measured at fair value. For unit linked liabilities, fair value is determined by reference to the value of the underlying net asset values of the group\u2019s unitised investment funds at the balance sheet date. For non-linked liabilities, fair value is based on a discounted cash flow analysis which incorporates an appropriate allowance for credit default risk. Deposits collected and claims are not included in the income statement but are added or deducted from investment contract liabilities. Borrowings are recognised initially at fair value, net of transaction costs. Borrowings are subsequently stated at amortised cost. The difference between the net proceeds and the redemption value is recognised in the income statement over the borrowing period using the effective interest rate method. Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Where the group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The group recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract. The group operates a number of defined benefit and defined contribution pension schemes in the UK and overseas. The assets of all UK defined benefit schemes are held in separate trustee administered funds which are subject to regular actuarial valuations every three years, updated by formal reviews at reporting dates. The actuarial assumptions used in the triennial valuation would normally be consistent or more prudent than those used for the purposes of IAS 19, \u2018Employee Benefits\u2019 reporting. The liability recognised in the Consolidated Balance Sheet in respect of the defined benefit pension schemes is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, provided any surplus in the Fund and Scheme is not restricted. Plan assets exclude the insurance contracts issued by the group. The defined benefit obligation is calculated actuarially each year using the projected unit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows. The discount rate is based on market yields of high quality corporate bonds which are denominated in the currency in which the benefits will be paid, and that have terms to maturity which approximate to those of the related pension liability. The group pays contractual contributions in respect of defined contribution schemes. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Derivative liabilities and repurchase agreements are measured at fair value, with changes in fair value recognised in profit or loss. The fair value of derivative liabilities is derived using broker quotes or models such as option pricing models, simulation models or a combination of models. The inputs for these models include a range of factors which are deemed to be observable, including current market and contractual prices for underlying instruments, period to maturity, correlations, yield curves and volatility of the underlying instruments. Repurchase agreements are valued based on the discounted cash flows expected to be paid, using an observable market interest rate, in line with the value of the underlying security. Collateral repayable on short position reverse repurchase agreements and other financial liabilities balances, including FX spots, broker and other payables, are measured at amortised cost. The carrying value of these liabilities approximates their fair value. Trail commission represents a liability for the present value of future commission costs on distribution agreements with intermediaries, recognised in the balance sheet on inception of the contract. At each subsequent reporting date the liability is remeasured, with changes reflected in profit or loss. The group leases offices, vehicles, IT equipment and investment properties under non-cancellable operating lease agreements. The group has elected to make use of the recognition exemptions as permitted in respect of short-term leases (lease contracts with a term of 12 months or less), and lease contracts for which the underlying asset is of low value. Such leases are not recognised on the Consolidated Balance Sheet but the group recognises the associated lease payments as an expense over the lease term. As a lessee, the group recognises leases on the balance sheet as \u2018right-of-use\u2019 assets and lease liabilities. The right-of-use assets are either classified as property, plant and equipment or investment property. The right-of-use assets\u2019 value is initially recognised as the calculated value of the lease liabilities, initial direct costs and incentives received. The right-of use assets are subsequently accounted for in accordance with the cost model in IAS 16, \u2018Property, Plant and Equipment\u2019 or as investment property under IAS 40, \u2018Investment Property\u2019. The group also assesses right-of-use assets classified as property, plant and equipment for impairment when such indicators exist. The initial measurement of the lease liabilities is made up of the present value of lease payments to be made over the lease term, including fixed lease payments and excluding lease incentive receivables. The group uses the incremental borrowing rate as a discount rate for calculating the lease liabilities. The lease liabilities are unwound over the term of the lease giving rise to an interest expense. Additionally, the liabilities are reduced when lease payments are made. The group reassesses the carrying amount of lease liabilities and right-of-use assets if certain events occur that modify the original assumptions used to calculate the lease balances upon initial recognition. The group provides a segmental analysis to enhance the understanding of the financial statements. Under the requirements of IFRS 8, \u2018Operating segments\u2019, 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. Revenue comprises of the following: Net premiums earned Revenue from insurance and investment contracts has been described in section (e) of this Note. Investment return Investment return has been described in Note 29 of this report. Fees from fund management and investment contracts* The group generates revenue from acting as the investment manager for clients. Fees charged on investment management services are based on the contractual fee arrangements applied to assets under management and recognised as revenue as the services are provided. The group\u2019s income from investment contracts is primarily derived from fees for administration and managing of funds in pension plans. Revenue generated on investment contracts is recognised as services are provided. No significant judgements are applied on the timing or transaction price. In the instances of performance fees where revenue is subject to meeting a certain performance threshold, such revenue is not recognised until the condition has been met, and it is highly probable that no significant reversal of amounts would occur. Variable costs directly related to securing new contracts are capitalised and amortised over the estimated period over which the revenue is earned. Transaction fees are charged to implement trades for clients. Such fees are charged at the time the transaction takes place and are based on the size of the underlying contract. House building* House building revenue arises from the sale of residential properties and land, and is recognised net of discounts and sales incentives. Sales of private houses are recognised on legal completion. Following the implementation of IFRS 15, \u2018Revenue from Contracts with Customers\u2019, the sale proceeds of part exchange properties are also included in revenue. Sales of social housing, where multiple units are developed and sold under a contractual agreement with a single customer, typically a housing association, are recognised over time in accordance with construction progress. Sales of land and commercial property are recognised on unconditional exchange, namely when contracts are exchanged or missives concluded and, where appropriate, construction is complete. The transaction price is determined using extensive research and expert judgement, current market values and regional variations. Warranties are provided on all properties and range from 2-10 years. Due to their features, these do not represent separate performance obligations. Professional services fees* The group\u2019s professional services fees revenue arises from professional services provided by employed surveyors and third party providers, panel management fees and administration fees. These fees are based on fee scales or contracts. Revenue is recognised when the service has been rendered. In addition, the group derives professional fees from facilitation of mortgage arrangements and related products such as conveyancing. These are based on an agreement/contract and could be tiered based on volume. The obligation in such instances is satisfied on completion of the mortgage/service, at which point the revenue is recognised. There is no significant judgement applied on the timing or amount of fee recognised. Insurance broker* Fees are charged on each performance obligation offered to the customer as per agreed structure. Revenue for placement services is recognised at the point in time when the intermediary has satisfied its performance obligation, that is when the terms of the insurance policy have been agreed contractually by the insurer and policyholder, and the insurer has a present right to payment from the policyholder. No significant judgements are applied on the timing or transaction price. * Contracts are either expected to last one year or less or reflect the right to consideration from a customer in an amount that corresponds directly with the value of the performance completed to date. As permitted under IFRS 15, the transaction price allocated to any unsatisfied contracts is not disclosed. Gross written premium represents the total premiums 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 income, but are included in the balance sheet investment contract liability. Outward reinsurance premiums are accounted for in the same accounting period as the related premiums for the direct or inwards reinsurance business being reinsured.
Investment return includes fair value gains and losses, excluding fair value movements attributable to available-for-sale (AFS) investments,
dividends, rent and interest. Dividends are accrued on an ex-dividend basis. Interest and rent are included on an accruals basis. Interest income for
financial assets which are not classified as fair value through profit or loss (FVTPL) is recognised using the effective interest method.
The tax shown in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income comprises current and deferred tax. Current tax Current tax comprises tax payable on current year profits, adjusted for non-tax deductible or non-taxable items, and any adjustments to tax payable in respect of previous periods. Current tax is recognised in the Consolidated Income Statement unless it relates to items which are recognised in the Consolidated Statement of Comprehensive Income or directly in equity. Deferred tax Deferred tax is calculated on differences between the accounting value of assets and liabilities and their respective tax values. Deferred tax is also recognised in respect of unused tax losses to the extent it is probable that future taxable profits will arise against which the losses can be utilised. Deferred tax is charged or credited to the Consolidated Income Statement, except when it relates to items charged or credited to the Consolidated Statement of Comprehensive Income or charged or credited directly in equity. Tax attributable to policyholders and equity holders The total tax expense shown in the group\u2019s Consolidated Income Statement includes income tax borne by both policyholders and equity holders. This has been split between tax attributable to policyholders\u2019 returns and equity holders\u2019 profits. Policyholder tax comprises the tax suffered on policyholder investment returns, while equity holder tax is corporation tax charged on equity holder profit. The separate presentation is intended to provide more relevant information about the tax that the group pays on the profits that it makes. Use of estimates Tax balances include the use of estimates and assumptions which affect items reported in the Consolidated Balance Sheet and Consolidated Income Statement. Although these estimates are based on management\u2019s best knowledge of current circumstances and future events and actions, actual results may differ from those estimates. For tax this includes the determination of assets and liabilities recognised in respect of uncertain tax positions and the estimation of future taxable income supporting deferred tax asset recognition. As the group operates internationally, it is exposed to uncertain tax positions and changes in legislation in the jurisdictions in which it operates. The assessment of uncertain tax positions is subjective and significant management judgement is required. This judgement is based on interpretation of legislation, management experience and professional advice. The directors have assessed the group\u2019s uncertain tax positions and are comfortable that the provisions in place are not material individually or in aggregate, and that a reasonable possible alternative outcome in the next financial year would not have a material impact to the results of the group. Tax rates The table below provides a summary of the standard corporate income tax rates of the main territories we operate in. 2022 2021 UK 19.0% 19.0% USA 21.0% 21.0% Bermuda 0.0% 0.0% Ireland 12.5% 12.5% Global minimum tax regime The Organisation for Economic Co-operation and Development (OECD) released a framework in December 2021 to address concerns at a global level about tax contributions of large multinational corporations, with subsequent guidance issued in 2022 and early 2023. This reflects agreement from over 135 jurisdictions to introduce a global minimum tax rate of 15%. The UK has published draft legislation to implement the OECD framework and apply a top-up tax to profits that are otherwise taxed at less than 15%. As at 31 December 2022 this legislation has not yet been substantively enacted. Under the proposed rules, the group is expected to be liable to top-up tax from 1 January 2024 on profits arising in territories with low tax rates. The group\u2019s liability to top-up tax will depend on the details of the legislation when it is enacted. The group are closely monitoring the progress of the framework and draft legislation in the UK and other territories in which the group operates. The fair value at the date of grant of the equity instrument is recognised as an expense, spread over the vesting period of the instrument. The total amount to be expensed is determined by reference to the fair value of the awards, excluding the impact of any non-market vesting conditions. At each balance sheet date, the group revises its estimate of the number of equity instruments which are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement and a corresponding adjustment is made to equity. On vesting or exercise, the difference between the expense charged to the income statement and the actual cost to the group is transferred to retained earnings. Where new shares are issued, the proceeds received are credited to share capital and share premium. An equity instrument is any contract which evidences a residual interest in the net assets of an entity. It follows that a financial instrument is treated as equity if: \u2022 there is no contractual obligation to deliver cash or other financial assets or to exchange financial assets or liabilities on unfavourable terms; and \u2022 the instrument is either a non-derivative which contains no contractual obligation to deliver a variable number of own equity instruments, or is a derivative which will be settled only by the group exchanging a fixed amount of cash, or other financial assets, for a fixed number of its own equity instruments. Where any group entity purchases the company\u2019s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to shareholders. Where such shares are subsequently sold, reissued or otherwise disposed of, any consideration received is included in equity attributable to shareholders, net of any directly attributable incremental transaction costs and the related income tax effects. Shares held on behalf of employee share schemes are disclosed as such on the Consolidated Balance Sheet. Under certain lease agreements, the group, as the lessor, is considered to substantially retain all the risks and reward of ownership of the underlying asset, therefore these contracts have been classified as operating leases. The Companies Act 2006 requires disclosure of information about the group\u2019s subsidiaries, associates, joint ventures and other significant holdings. A complete list of the group\u2019s subsidiaries, associates, joint ventures and significant holdings is provided in Notes 42 and 43. Subsidiaries are those entities (including special purpose entities, mutual funds and unit trusts) over which the group directly or indirectly has the power to govern the operating and financial policies in order to gain economic benefits. Profits or losses of subsidiary undertakings sold or acquired during the year are included in the consolidated results up to the date of disposal or from the date of gaining control. The interests of parties, other than the group, in investment vehicles, such as unit trusts, are classified as liabilities and appear as \u2018Net asset value attributable to unit holders\u2019 in the Consolidated Balance Sheet. The basis by which subsidiaries are consolidated in the group financial statements is outlined in the Basis of preparation (Note 1). Associates are entities over which the group has significant influence but which it does not control. It is presumed that the group has significant influence where it has between 20% and 50% of the voting rights in the investee unless indicated otherwise. Joint ventures are entities where the group and other parties have joint control over their activities. The basis by which associates and joint ventures are consolidated in the group financial statements is outlined in the basis of preparation (Note 1) . ", "dimensions": { "concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-602": { "value": "(ii) Going concern The group\u2019s business activities, together with the factors likely to affect its future development, performance and position in the current economic environment are set out in this Annual Report and Accounts. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in these consolidated financial statements. Principal risks and uncertainties are detailed on pages 56 to 59. The directors have made an assessment of the group\u2019s going concern, considering both the current performance and the outlook for a period of at least, but not limited to, 12 months from the date of approval of these consolidated financial statements, using the information available up to the date of issue of this Annual Report and Accounts. The group manages and monitors its capital and liquidity, and applies various stresses, including high inflationary scenarios, to those positions to understand potential impacts from market downturns. Our key sensitivities and the impacts on our capital position from a range of stresses are disclosed in section 5.01 of the Full year results in the 2022 Preliminary Management Report 1 . These stresses do not give rise to any material uncertainties over the ability of the group to continue as a going concern. Based upon the available information, the directors consider that the group has the plans and resources to manage its business risks successfully and that it remains financially strong and well diversified. Having reassessed the principal risks and uncertainties (both financial and operational) in light of the current economic environment, as detailed on pages 56 to 59, the directors are confident that the group and company will have sufficient funds to continue to meet its liabilities as they fall due for a period of, but not limited to, 12 months from the date of approval of the financial statements and therefore have considered it appropriate to adopt the going concern basis of accounting when preparing the financial statements. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-603": { "value": "(iii) New standards, interpretations and amendments to published standards that have been adopted by the group The group has applied the following standards and amendments for the first time in its annual reporting period commencing 1 January 2022, which did not give rise to a material impact on the group\u2019s consolidated financial statements. Annual Improvements to IFRS Standards 2018-2020 These amendments, issued in May 2020, make minor amendments to IFRS 1 \u2018First-time Adoption of IFRS\u2019, IFRS 9 \u2018Financial instruments\u2019, IAS 41 \u2018Agriculture\u2019 and the illustrative examples accompanying IFRS 16 \u2018Leases\u2019. Amendments to IAS 16 \u2013 Property, plant and equipment These amendments, issued in May 2020, prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss. Amendments to IAS 37 \u2013 Provisions, contingent liabilities and contingent assets These amendments, issued in May 2020, specify which costs a company includes when assessing whether a contract will be loss-making. Amendments to IFRS 3 \u2013 Business Combinations These amendments, issued in May 2020, update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. 1. Section 5.01 of the Full year results in the 2022 Preliminary Management Report is unaudited. (iv) Standards, interpretations and amendments to published standards which are not yet effective IFRS 17 \u2013 Insurance Contracts and IFRS 9 \u2013 Financial Instruments The group will apply IFRS 17, \u2018Insurance Contracts\u2019 and IFRS 9, \u2018Financial Instruments\u2019 for the first time on 1 January 2023. These standards will bring significant changes to the accounting for insurance and reinsurance contracts and financial instruments and are expected to have a material impact on the group\u2019s financial statements in the period of initial application. (a) Introduction IFRS 17, \u2018Insurance Contracts\u2019 IFRS 17, \u2018Insurance Contracts\u2019 was originally issued in May 2017 by the IASB, and subsequent amendments were issued in June 2020. The standard is effective for annual periods beginning on or after 1 January 2023 following endorsement for use in the UK in May 2022. The standard, which replaces IFRS 4, \u2018Insurance Contracts\u2019, will be applied retrospectively, subject to the transitional options provided for in the standard and provides a comprehensive approach for accounting for insurance contracts including their measurement, income statement presentation and disclosure. The key general principles of IFRS 17 are that an entity: \u2022 Identifies insurance contracts as those under which the entity accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder; \u2022 Separates specified embedded derivatives, distinct investment components and distinct non-insurance goods or services from insurance contracts and accounts for them in accordance with other accounting standards; \u2022 Aggregates the insurance contracts into groups it will recognise and measure (by portfolio, year of inception and profitability); \u2022 Recognises and measures groups of insurance contracts at: \u2013 a risk-adjusted present value of the future cash flows (the fulfilment cash flows) that incorporates all available information about the fulfilment cash flows; and \u2013 an amount representing the unearned profit in the group of contracts (the contractual service margin or CSM); \u2022 Recognises profit from a group of insurance contracts over the period the group provides insurance coverage. If a group of contracts is expected to be onerous (i.e. loss making) over the remaining coverage period, a loss is recognised immediately; and \u2022 Presents insurance service results (including insurance revenue) separately from insurance finance income or expenses with an accounting policy choice to disaggregate insurance income and expense for the period between profit or loss and other comprehensive income. IFRS 9, \u2018Financial Instruments\u2019 In July 2014, the IASB issued IFRS 9, \u2018Financial Instruments\u2019 which was effective for annual periods beginning on or after 1 January 2018. The standard replaced IAS 39, \u2018Financial Instruments: Recognition and Measurement\u2019. It includes new principles around classification and measurement of financial instruments, introduces an impairment model based on expected credit losses (replacing the current model based on incurred losses) and new requirements on hedge accounting. The IASB subsequently issued \u2018Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts\u2019 which allowed entities which meet certain requirements to defer their implementation of IFRS 9 until adoption of IFRS 17, \u2018Insurance Contracts\u2019 or 1 January 2021, whichever is the earlier. In June 2020, the IASB agreed to extend the temporary exemption in IFRS 4 from applying IFRS 9 to annual reporting periods beginning on or after 1 January 2023. The group has qualified for, and has made use of this deferral option, and will therefore apply IFRS 9 for the first time on 1 January 2023, with a restatement of 2022 comparatives. IFRS 9 classifies financial assets into the following three categories: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The classification of financial assets is based on the entity\u2019s business model for managing them, as well as their contractual cash flow characteristics. With the exception of financial assets measured under fair value through profit or loss (FVTPL), an expected credit loss impairment model applies to all financial assets in scope (including lease receivables and contract assets). The new impairment model requires utilising not only past events and current conditions but also reasonable and supportable forward-looking information, in order to assess the credit risk profiles of those financial assets in scope. Most requirements around financial liabilities in IAS 39 have been retained by IFRS 9, and hedge accounting requirements have been revised by replacing some of the prescriptive rules in IAS 39 with more principle-based requirements, to better align with the entity\u2019s risk management activities. 1 Basis of preparation continued (b) Estimated impacts of the adoption of IFRS 17 and IFRS 9 The group has assessed the estimated impact that the initial application of IFRS 17 and IFRS 9 will have on its consolidated financial statements at the transition date of 1 January 2022. The total adjustment to the group\u2019s equity attributable to owners of the parent is estimated to be a reduction of \u00a35.5bn. The estimated impacts on the key line items in the group\u2019s consolidated balance sheet are set out below: 31 December 2021 (as reported) Adjustments due to adoption of IFRS 9 Adjustments due to adoption of IFRS17 1 January 2022 (restated) Balance Sheet item \u00a3bn \u00a3bn \u00a3bn \u00a3bn Financial investments 538.4 (0.6) \u2013 537.8 Net insurance contract liabilities 1 (82.9) \u2013 (6.2) (89.1) Net deferred tax (liabilities)/assets (0.2) 0.1 1.3 1.2 Other (444.8) \u2013 (0.1) (444.9) Equity attributable to owners of the parent 10.5 (0.5) (5.0) 5.0 1. Net insurance contract liabilities reflect insurance contract assets and liabilities, net of reinsurance contracts. While the adoption of these accounting standards will have an impact on the timing and profile of profit recognition, as communicated at the group\u2019s IFRS 17 investor and analyst event on 29 November 2022, the underlying economics and cash generation of the group\u2019s businesses do not change. The financial impacts noted above will be reflected, where appropriate, in the interim financial statements for the period ending 30 June 2023, and in the group\u2019s Annual Report and Accounts for the year ending 31 December 2023. The financial impacts relating to the periods ending 30 June 2022 and 31 December 2022 have not yet been finalised and are not reasonably estimable for the purpose of inclusion in these consolidated financial statements. (i) Adjustments due to the adoption of IFRS 17 The different timing of profit recognition will result in an increase in liabilities, and therefore decrease in equity attributable to owners of the parent on adoption of IFRS 17. This reflects that a portion of profits previously recognised and accumulated in equity under IFRS 4 will be included in the measurement of the liabilities under IFRS 17. This increase in liabilities can be attributed to the following: Changes from IFRS 4 Estimated impact on net insurance contract liabilities on transition to IFRS 17 \u00a3bn Remeasurement of liabilities: the IFRS 17 cash flows are best estimate and exclude all prudent margins included in the IFRS 4 liabilities. Removal of these margins coupled with other changes to the insurance contract measurement, including discount rates and the exclusion of non-attributable expenses, results in a lower best estimate liability. (7.5) Creation of a risk adjustment \u2013 IFRS 17 incorporates a specific risk adjustment for non-financial risk (which is lower than the prudent margins included within the IFRS 4 liabilities). 2.5 Creation of CSM: determined using the transition approaches described below and reflecting the unearned profit of these contracts. Under IFRS 4 profit could be recognised at inception. 11.2 Total 6.2 (ii) Adjustments due to the adoption of IFRS 9 Upon transition to IFRS 9 on 1 January 2022, the group\u2019s equity attributable to owners of the parent will decrease by c.\u00a30.6bn (before tax). This predominantly reflects the remeasurement of assets following the reclassification of a proportion of financial investments from fair value through profit or loss to amortised cost, in order to better align the accounting treatment of assets that are backing the CSM component of insurance contract liabilities, which is measured at locked-in discount rates under IFRS 17. The application of the expected credit loss impairment requirements does not have a material impact on the group\u2019s equity at the point of transition. (c) Significant accounting policies \u2013 IFRS 17, \u2018Insurance Contracts\u2019 Long term insurance contracts \u2013 initial measurement Insurance contracts are contracts which transfer significant insurance risk to the insurer at the inception of the contract. This is the case if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, other than a scenario which lacks commercial substance. Such contracts remain insurance contracts until all rights and obligations are extinguished or expire. Contracts can be reclassified as insurance contracts after inception if insurance risk becomes significant. Any contracts not considered to be insurance contracts under IFRS 17 are classified as investment contracts and are measured under IFRS 9. The scope of IFRS 17 is very closely aligned to IFRS 4. All of the group\u2019s in scope insurance contracts are accounted for under the general measurement model which measures a group of insurance contracts as the total of: \u2022 fulfilment cash flows; and \u2022 a CSM representing the unearned profit the group will recognise as it provides services under the insurance contract. Fulfilment cash flows Fulfilment cash flows comprise unbiased and probability-weighted estimates of future cash flows, discounted to present value to reflect the time value of money and financial risks, plus a risk adjustment for non-financial risk. The group\u2019s objective in estimating future cash flows is to determine the expected value, or the probability weighted mean, of the full range of possible outcomes, considering all reasonable and supportable information available at the reporting date without undue cost or effort. The group estimates future cash flows considering a range of scenarios which have commercial substance and give a good representation of possible outcomes. The cash flows from each scenario are probability-weighted and discounted using current assumptions. When estimating future cash flows, the group includes all cash flows that are within the contract boundary. The contract boundary for the group\u2019s contracts is very closely aligned with that applied under IFRS 4. The cash flows include: \u2022 premiums and related cash flows; \u2022 claims and benefits, including reported claims not yet paid, incurred claims not yet reported and expected future claims; \u2022 investment management costs incurred in the provision of an investment return service or to enhance the benefits of an insurance contract; \u2022 payments to policyholders resulting from embedded surrender value options; \u2022 an allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs; \u2022 claims handling costs; \u2022 policy administration and maintenance costs, including recurring commissions that are expected to be paid to intermediaries; \u2022 an allocation of fixed and variable overheads directly attributable to fulfilling insurance contracts; and \u2022 transaction-based taxes. The group incorporates, in an unbiased way, all reasonable and supportable information available without undue cost or effort about the amount, timing and uncertainty of those future cash flows. The group estimates the probabilities and amounts of future payments under existing contracts based on information obtained, including: \u2022 information about claims already reported by policyholders; \u2022 other information about the known or estimated characteristics of the insurance contracts; \u2022 historical data about the group\u2019s own experience, supplemented when necessary, with data from other sources. Historical data is adjusted to reflect current conditions; and \u2022 current pricing information, when available. The measurement of fulfilment cash flows-includes insurance acquisition cash flows which are allocated as a portion of premium to profit or loss (through insurance revenue) over the period of the contract. Risk adjustment The risk adjustment for non-financial risk for a group of insurance contracts reflects the compensation that the group would require for bearing uncertainty about the amount and timing of the cash flows that arises from non-financial risk after diversification. We have calibrated the group\u2019s risk adjustment using a Value at Risk (VAR) methodology. The total group risk adjustment at transition was \u00a32.5bn. Discounting The insurance contract fulfilment cash flows are discounted at rates that reflect the characteristics of the insurance contract liabilities. These have been determined using the top-down approach, starting from an appropriate asset portfolio with deductions to remove risks in the assets that are not present in the insurance liabilities. As is the case under IFRS 4, the discount rate is a key determinant of the measurement of the insurance liability, particularly for annuity business. At transition, the average credit default deduction was c.41bps compared with c.43bps under IFRS 4. Contractual service margin The group\u2019s CSM is a component of the asset or liability for the group of insurance contracts that represents the unearned profit the group will recognise as it provides services in the future. The group measures the CSM on initial recognition at an amount that, unless the group of contracts is onerous, results in no income or expenses arising from: \u2022 initial recognition of the fulfilment cash flows; \u2022 any cash flows arising from the contracts in the group at that date; \u2022 the derecognition at the date of initial recognition of: \u2013 any asset for insurance acquisition cash flows; and \u2013 any other asset or liability previously recognised related to the group of insurance contracts. Aggregation The level of aggregation determines the unit of account at which IFRS 17 calculations are performed. This is determined firstly by dividing the business written into portfolios. Portfolios comprise groups of contracts with similar risks which are managed together. Portfolios are further divided based on expected profitability at inception into three categories: onerous contracts, contracts with no significant risk of subsequently becoming onerous, and the remainder. IFRS 17 also requires that no group for level of aggregation purposes may contain contracts issued more than one year apart. 1 Basis of preparation continued Onerous contracts For groups of contracts assessed as onerous, the group recognises a loss in profit or loss for the net outflow, resulting in the carrying amount of the liability for the group being equal to the fulfilment cash flows and the CSM of the group being zero. A loss component is established by the group for the liability for remaining coverage for an onerous group, which represents the losses recognised. Long term insurance contracts \u2013 subsequent measurement The group measures the carrying amount of a group of insurance contracts at the end of each reporting period as the sum of: (i) the liability for remaining coverage comprising fulfilment cash flows related to future service allocated to the group at that date and the CSM of the group at that date; and (ii) the liability for incurred claims for the group reflecting the fulfilment cash flows related to past service allocated to the group at that date. Contractual service margin \u2013 measurement The CSM at the end of the reporting period represents the profit in the group of insurance contracts that has not yet been recognised in profit or loss, because it relates to future service to be provided. For a group of insurance contracts the carrying amount of the CSM of that group at the end of the reporting period equals the carrying amount at the beginning of the reporting period adjusted, as follows: \u2022 the effect of any new contracts added; \u2022 interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates at initial recognition; \u2022 the changes in fulfilment cash flows relating to future service, except to the extent that: \u2013 such increases in the fulfilment cash flows exceed the current carrying amount of the CSM, giving rise to a loss; or \u2013 such decreases in the fulfilment cash flows are allocated to the loss component of the liability for remaining coverage; \u2022 the amount recognised as insurance revenue because of the transfer of services in the period, determined by allocation of the contractual service margin at the end of the period over the current and remaining coverage period; and \u2022 the effect of any currency exchange differences on the CSM. The changes in fulfilment cash flows relating to future service that adjust the CSM comprise of: \u2013 experience adjustments that arise from the difference between the premium receipts (net of refunds) and any related cash flows such as insurance acquisition cash flows and insurance premium taxes and the estimate, at the beginning of the period, of the amounts expected. Differences related to premiums received (or due) in respect of current or past services are recognised immediately in profit or loss while differences related to premiums received (or due) for future services are adjusted against the CSM; \u2013 changes in estimates of the present value of future cash flows in the liability for remaining coverage, except those relating to the time value of money and changes in financial risk (which are recognised in the statement of profit or loss and other comprehensive income rather than adjusting the CSM); \u2013 differences between any investment component expected to become payable in the period and the actual investment component that becomes payable in the period; and \u2013 changes in the risk adjustment for non-financial risk that relate to future service. Adjustments to the CSM noted above are measured at discount rates that reflect the characteristics of the cash flows of the group of insurance contracts at initial recognition (i.e. the weighted average of the rates applicable at the date of initial recognition of contracts that joined a group over a 12-month period). Onerous contracts Groups of contracts that were not onerous at initial recognition can also subsequently become onerous if assumptions and experience changes. The group establishes a loss component for any onerous group depicting the future losses recognised. The loss component is released based on a systematic allocation of the subsequent changes in the fulfilment cash flows to: (i) the loss component; and (ii) the liability for remaining coverage excluding the loss component. The loss component is also updated for subsequent changes in estimates of the fulfilment cash flows related to future service. The systematic allocation of subsequent changes to the loss component results in the total amounts allocated to the loss component being equal to zero by the end of the coverage period of a group of contracts (since the loss component will have materialised in the form of incurred claims). The loss component ensures that over the duration of the contract, the correct amounts are recognised as insurance revenue and insurance service expenses. Contractual service margin \u2013 recognition The amount of contractual service margin recognised in the income statement for a group of insurance contracts reflects the insurance contract services provided. The proportion of the CSM earned is calculated as the amount of coverage units provided in the period divided by the sum of all the future and current period coverage units. The group has elected to discount the future coverage units in this calculation. The table below indicates the main insurance contracts services provided under the group\u2019s insurance contracts and selected coverage unit(s) used to measure those services. Insurance contract Insurance service Coverage unit(s) Immediate annuity Payment of insurance claims Expected annual claims payments Deferred annuity \u2022 Payment of insurance claims (payment phase) \u2022 Investment return service (deferral phase) \u2022 Lump sum death benefits (deferral phase) \u2022 Expected annual claims payments \u2022 Expected investment return on backing assets \u2022 Sum assured Longevity swaps Payment of floating leg of swap Expected annual floating leg payments Retail Protection Potential mortality or morbidity claims Sum assured Group Protection Potential mortality or morbidity claims Sum assured Where a specific unit of account contains a mixture of services, and therefore coverage units, it is necessary to weight the coverage units so that the resulting profile of CSM release reflects the overall package of benefits provided. This is particularly pertinent to units of account incorporating a combination of immediate and deferred annuities. Under IFRS 17, deferred annuities usually provide multiple services, split between the two phases of benefit provision (the deferral phase and the payment phase). Significant judgement is therefore required to combine the different coverage units so that they fairly reflect the services provided. The weighting between the deferral phase and the payment phase coverage units is calculated so that the services provided in the deferral phase reflect the investment return provided and the probability weighted delivery of any lump sum death benefits, both adjusted to target that all of the CSM is earned in the deferral phase for all contracts which do not enter the payment phase either through transfer out, withdrawal of funds or death. Earning the CSM over the coverage period will slow down profit recognition for annuities in comparison to IFRS 4 which allowed the recognition of profit on inception and more closely linked revenue recognition to risk release rather than the provision of service. Investment components Investment components will not be included in insurance revenue and insurance service expenses under IFRS 17. As a result, revenue from some annuity and universal life contracts will be reduced in comparison with the premium recognised under IFRS 4. The group will identify the investment component of a contract by determining the amount that it would be required to repay to the policyholder in all scenarios with commercial substance. Insurance finance income and expense IFRS 17 requires an accounting policy decision as to whether to recognise all finance income or expense in profit or loss, or whether to disaggregate the income or expense that relates to changes in financial assumptions into other comprehensive income. All finance income and expense will be included in profit or loss except for protection business where this will be disaggregated. Reinsurance contracts held The measurement of reinsurance contracts held follows the same principles as those for insurance contracts issued, with the exception of the following: \u2022 measurement of the cash flows includes an allowance on a probability-weighted basis for the effect of any non-performance by the reinsurers, including the effects of collateral and losses from disputes; \u2022 the group determines the risk adjustment for non-financial risk so that it represents the amount of risk being transferred to the reinsurer; \u2022 both day 1 gains and day 1 losses are not recognised at initial recognition in the statement of financial position but are deferred into CSM and released to profit or loss as the reinsurer renders services, except for any portion of a day 1 loss that relates to events before initial recognition; \u2022 if the reinsurance contract is recognised prior to a loss-making underlying contract, the reinsurance CSM can be adjusted to offset a portion of the inception loss (the loss recovery component); and \u2022 subsequent changes in the fulfilment cash flows are recognised in profit or loss if the related changes arising from the underlying ceded contracts are recognised in profit or loss. Alternatively, changes in the fulfilment cash flows adjust the CSM. Transition On transition to IFRS 17, the group has applied the fully retrospective approach unless impracticable. The full retrospective approach requires the group to: \u2022 identify, recognise and measure each group of insurance and reinsurance contracts as if IFRS 17 had always applied; \u2022 derecognise any existing balances that would not exist had IFRS 17 always applied; and \u2022 recognise any resulting net difference in equity. If it was impracticable to apply a full retrospective approach to a group of contracts then the group has chosen between the modified retrospective approach and the fair value approach. If the group could not obtain reasonable and supportable information necessary to apply the modified retrospective approach, then the fair value approach has been chosen. 1 Basis of preparation continued The group has applied the following transition approaches to its material insurance contract portfolios on transition to IFRS 17, by year of issue: Transition Approach Annuities UK Protection US Protection Full retrospective 2021 2021 2021 Modified retrospective 2016-2020 2012-2020 2011-2020 Fair value Pre-2016 Pre-2012 Pre-2011 Full retrospective approach The full retrospective approach has been determined to be impracticable where the effects of retrospective application are not determinable because information required has not been collected (or not with sufficient granularity), application would require the application of hindsight, or information is unavailable because of system migrations, data retention requirements or other reasons. Specific examples include: \u2022 historic calibration of IFRS 17 specific judgements, such as the scale of the risk adjustment; \u2022 expectations about a contract\u2019s profitability and risks of becoming onerous required for identifying groups of contracts; \u2022 information about historical cash flows and discount rates required for determining the estimates of cash flows on initial recognition and their subsequent changes on a retrospective basis; \u2022 information required to allocate fixed and variable overheads to groups of contracts, because the group\u2019s current accounting policies do not require such information; and \u2022 information about certain changes in assumptions and estimates because they were not documented on an ongoing basis. Modified retrospective approach The objective of the modified retrospective approach is to achieve the closest outcome to retrospective application possible using reasonable and supportable information available without undue cost or effort. The only modification applied by the group is that for some groups of contracts issued before 2020, the risk adjustment for non-financial risk on initial recognition will be determined by adjusting the amount at 1 January 2022 for the expected release of risk before that date. The expected release will be determined with reference to the release of risk of similar contracts that the group issued in 2022. This modification has been used to avoid the application of hindsight to the calibration of the risk adjustment in prior periods. Fair value approach The group has applied the fair value approach on transition for certain groups of contracts as, prior to transition, it grouped contracts from multiple cohorts and years into a single unit for accounting purposes. Obtaining reasonable and supportable information to apply the full retrospective approach was impracticable without undue cost or effort. The group has determined the CSM of the liability for remaining coverage at the transition date, as the difference between the fair value of the group of insurance contracts and the fulfilment cash flows measured at that date. In determining fair value, the group has applied the requirements of IFRS 13, \u2018Fair Value Measurement\u2019, except for the demand deposit floor requirement. The fair value attributed to the in-scope annuity business is calculated with reference to a price generated using the group\u2019s pricing models and pricing assumptions at the transition date. This incorporates an expected internal rate of return that has been validated against relevant market transactions. The group has aggregated contracts issued more than one year apart in determining groups of insurance contracts under the fair value approach at transition. The group did not have reasonable and supportable information to aggregate groups into those including only contracts issued within one year. For portfolios of protection contracts, the group has elected to disaggregate insurance finance income or expenses between amounts included in profit or loss and amounts included in other comprehensive income. For these portfolios, the cumulative amount of insurance finance income or expense recognised in other comprehensive income at the transition date and has been reset to zero in line with the provisions of the standard. (d) Significant accounting policies \u2013 IFRS 9, \u2018Financial Instruments\u2019 Financial assets \u2013 classification and measurement The classification and measurement of financial assets depends on their contractual cash flow characteristics and how they are managed (the entity\u2019s business model). The contractual cash flow characteristics test aims to identify those assets with cash flows consistent with a basic lending arrangement, i.e. which are \u2018solely payments of principal and interest\u2019 (SPPI). The business model test refers to how an entity manages its financial assets with the objectives of generating cash flows. These factors determine whether the financial assets are measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss. Assets are therefore typically characterised as follows: \u2022 amortised cost: financial assets with contractual terms that give rise solely to interest and principal cash flows and which are held in a business model whose objective is to hold the assets to collect their cash flows; \u2022 fair value through other comprehensive income (FVOCI): financial assets with contractual terms that give rise solely to interest and principal cash flows and which are held in a business model whose objective is achieved by holding the assets to collect their cash flows and selling them; \u2022 FVTPL: all other financial assets. Notwithstanding the above, on initial recognition the group may irrevocably designate to FVTPL a financial asset that would otherwise be measured at amortised cost or FVOCI if doing so eliminates or greatly reduces an accounting mismatch. Additionally, on initial recognition of an equity investment not held for trading the group may irrevocably elect to present its subsequent changes in fair value through other comprehensive income. Based on the new requirements, IFRS 9 will affect the classification and measurement of financial assets as follows: \u2022 financial assets continuing to be measured at FVTPL: \u2013 equity investments, measured at FVTPL under IAS 39, will continue to be measured at FVTPL under IFRS 9; \u2013 derivative assets are held for trading instruments under both IAS 39 and IFRS 9, and will therefore continue to be measured at FVTPL, unless designated as hedging items as part of a hedge accounting relationship; \u2013 debt instruments backing annuity liabilities, including surplus assets, are currently accounted for at FVTPL as they are managed on a fair value basis. Most of these will retain the same measurement under IFRS 9 as their business model does not naturally fit a \u2018held to collect\u2019 or \u2018held to collect and sell\u2019 business model, irrespective of their contractual cash flows characteristics; and \u2013 other debt securities backing investment contract liabilities and surplus shareholder assets will continue to be accounted for at FVTPL as they are managed on a fair value basis, consistent with their IAS 39 measurement. \u2022 financial assets remeasured to amortised cost or FVOCI: \u2013 as the date of transition to IFRS 9 for the group is the same as that for IFRS 17, the group has reassessed the classification and measurement of certain financial assets backing annuities liabilities, in order to better match interest rate and inflation sensitivities to IFRS 17 liabilities. This is because, while the Annuities best estimate liability and risk adjustment under IFRS 17 are measured with current financial assumptions, the CSM is measured with locked-in discount rates. Therefore, a sub-portfolio of long dated debt instruments backing annuity contracts but in surplus to the IFRS 17 best estimate liability and risk adjustment, and passing the SPPI test, was separately identified. These assets will be used to manage interest and inflation rate exposure. They will be held to maturity in a \u2018held to collect\u2019 business model and accounted for at amortised cost; and \u2013 assets backing protection liabilities are measured at FVTPL under IAS 39. Based on the IFRS 9 criteria, these assets pass the SPPI test and will be measured at amortised cost or FVOCI, depending on their business model. \u2022 receivable balances are accounted for at amortised cost under both IAS 39 and IFRS 9. Financial assets \u2013 impairment IFRS 9 replaces the incurred losses impairment model in IAS 39 with a new impairment model, based on expected credit losses (ECLs). The new impairment model applies to the group\u2019s financial assets measured at amortised cost or FVOCI, as well as lease receivables in scope of IFRS 16 \u2018Leases\u2019 and contract assets in scope of IFRS 15 \u2018Revenue from Contracts with Customers\u2019. Under IFRS 9, expected credit losses are defined as the present value of the difference between all contractual cash flows that are due and all cash flows that the entity expects to receive (i.e. the cash shortfall), weighted based on their probability of occurrence. The loss allowance recognised under the new standard can be equal to an amount corresponding to a 12-month ECL or a lifetime ECL. A lifetime ECL is the ECL resulting from all possible default events over the expected life of the financial asset; a 12-month ECL is the portion of lifetime ECL resulting from default events on a financial asset that are possible within the 12 months after the reporting date. The ECL model is run from the date of initial recognition of a financial asset, and its output updated at every reporting period, even if no actual loss events have taken place. The impact of updating the inputs of the ECL model in the reporting period is recognised in profit or loss directly where it affects the carrying value of financial assets at amortised cost, while for assets at FVOCI an equal and opposite movement is recorded in other comprehensive income. In order to determine whether the group measures ECLs at an amount equal to 12-month ECL or lifetime ECL, at each reporting period the group is required to assess which \u2018stage\u2019 a financial asset falls into. Stages reflect the general pattern of deterioration in credit risk of a financial instrument that ultimately defaults, as follows: \u2022 Stage 1 includes financially healthy financial assets that are expected to perform in line with their contractual terms, and which have no signs of increased credit risk; \u2022 when the credit risk of a certain financial asset has significantly increased since initial recognition, the instrument no longer falls into Stage 1. In that case, if the instrument is not credit-impaired, the instrument will fall into Stage 2; and \u2022 Stage 3 applies to credit-impaired financial instruments. When financial assets are under Stage 1, 12-month ECLs are recognised. When financial assets are under Stage 2 or 3, lifetime ECLs are recognised. An instrument moves down (or up) the stages when a significant increase in credit risk (SICR) has happened (or has reversed). When determining whether the credit risk of a financial instrument has increased significantly since initial recognition, the group considers reasonable and supportable information, both qualitative and quantitative, that is relevant and is available without undue cost or effort, including forward-looking information at its disposal. The provisions of IFRS 9 include a rebuttable presumption that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, which is taken into account for this assessment. Additionally, the group makes use of a practical expedient available in IFRS 9 whereby it can be assumed that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date (e.g. investment grade as determined by the group\u2019s asset managers). This allows recognition of 12-month ECLs as opposed to, potentially, lifetime ECLs. The group estimates ECLs on its financial investments at amortised cost and debt instruments at FVOCI by using the probability of default approach. Based on this method, the ECLs are a probability-weighted estimate of the present value of estimated cash shortfalls, i.e. the weighted average of credit losses, with the respective risks of a default occurring used as the weightings. For this purpose, the key elements to be calculated are the Probability of Default (PD), i.e. the estimate of the likelihood of default over a given time horizon (either 12 months or lifetime); the respective Loss Given Default (LGD); and the Exposure at Default (EAD). 1 Basis of preparation continued In order to determine 12-month or lifetime PDs the group\u2019s models utilise historical data obtained from S&P and Moody\u2019s in order to evaluate transitions (i.e. the probability that a security changes rating in a given year) and defaults, plus scenario-specific annual scaling factors which adjust the PDs for forward-looking information. The final PDs produced by the model are unconditional, i.e. they incorporate both the probability of not defaulting until the start of the period, and the subsequent probability of default in that period, conditional on the position not having defaulted to that point. This allows them to be summed over 12 months to provide 12-month PD estimates, or over all remaining months to produce lifetime PD estimates. LGD is the magnitude of the likely loss if there is a default, based on the history of recovery rates of claims against defaulted counterparties, and taking into account collateral values where applicable. EAD represents the expected exposure in the event of a default, based on the current exposure to the counterparty and potential changes to the current amount allowed under the contract. Finally, the group has adopted a simplified approach for trade receivables, contract assets and finance and operating lease receivables. This allows measurement of lifetime ECLs only, thereby removing the need to identify SICRs. For these balances, the group makes use of provision matrices in order to calculate such lifetime ECLs. This is a practical expedient allowed by IFRS 9 whereby historical credit loss experience and fixed loss rates are applied to the balances outstanding. Where possible, historical loss rates are adjusted to allow for forward looking information. Owing predominantly to the high credit rating across the group\u2019s financial assets in scope of the new impairment model, the calculation of ECLs as at the date of initial application of IFRS 9 did not give rise to a material impact. Financial liabilities IFRS 9 largely retains the requirements of IAS 39 for the classification and measurement of financial liabilities, which can be at either amortised cost or FVTPL. In contrast with IAS 39, under IFRS 9 the amount of fair value changes for financial liabilities at FVTPL attributable to changes in the credit risk of the liability is presented in other comprehensive income. However, if this treatment creates, or enlarges, an accounting mismatch in profit or loss, the group must present all gains or losses for that liability (including the effects of changes in the credit risk of that liability) in profit or loss. The new requirements for financial liabilities did not affect the group\u2019s classification and measurement of its instruments. Hedge accounting When initially applying IFRS 9, the group may choose to either continue to apply hedge accounting requirements in IAS 39 or move to the new IFRS 9 principles. The group will update its accounting policies to adopt IFRS 9 requirements. These requirements are better aligned with the risk management activities of the group and therefore it is expected that going forward more risk management strategies will qualify for hedge accounting. Changes to hedge accounting requirements are not currently expected to have a significant impact on the group\u2019s results. Transition On transition, changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively. For the group, IFRS 9 has a date of initial application of 1 January 2023, which coincides with the implementation with IFRS 17. On initial application, while IFRS 17 requires the presentation of at least one restated comparative period, IFRS 9 permits, but does not require, restatement of comparative periods. In line with IFRS 17 the group has chosen to restate comparative periods under IFRS 9. While the standard does not apply to financial assets already derecognised by 1 January 2023, the group has applied a \u2018classification overlay\u2019 introduced by the IASB per an amendment to IFRS 17 entitled \u2018Initial Application of IFRS 9 and IFRS 17 \u2013 Comparative Information\u2019. This allows an entity applying IFRS 17 and IFRS 9 at the same time to present comparative information as if the classification, measurement and impairment requirements of IFRS 9 had been applied to them, irrespective of derecognition date. From a classification and measurement perspective, financial assets\u2019 business models have been assessed as at the date of initial application and were applied consistently in all periods presented. If an asset was in scope of the classification overlay described above, the group aligned the classification and measurement of each financial asset in the comparative periods with what it expected it would have been on 1 January 2023. Such assessment was performed based on reasonable and supportable information available at 1 January 2022, the transition date. Any difference between the IAS 39 carrying amount of a financial asset and the carrying amount at the transition date that results from applying IFRS 9 or the classification overlay was recognised in opening retained earnings. With regards to impairment, similarly to classification and measurement, the group assessed whether as at 1 January 2023 there had been a SICR as compared to the date that a financial instrument was initially recognised, and applied a 12-month or lifetime ECL accordingly. The group chose to apply the impairment requirements of IFRS 9 consistently to all of the applicable financial instruments on its books during the comparative periods. To the extent the classification overlay applied and therefore an asset was derecognised by 1 January 2023, any expected credit losses recognised in the comparative periods were reversed upon disposal. The low credit risk practical expedient described previously was also available for the purpose of transition, and the group made use of this in line with set criteria. On transition to IFRS 9, any additional provision recognised when compared to IAS 39 was recognised in opening retained earnings. However, if this related to a financial asset at FVOCI, an equal and opposite movement was reflected in the OCI reserve. Amendments to IAS 1 \u2013 Presentation of Financial Statements and IFRS Practice Statement 2: \u2018Making Materiality Judgements: Disclosure of Accounting Policies\u2019 These amendments, issued in February 2021, intend to help preparers in deciding which accounting policies to disclose in their financial statements, by applying materiality judgements. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group is currently revisiting its accounting policy disclosures to ensure compliance and consistency with the new requirements. Amendments to IAS 8 \u2013 Accounting policies, Changes in Accounting Estimates and Errors: \u2018Definition of Accounting Estimates\u2019 These amendments, issued in February 2021, aim to help entities to distinguish between accounting policies and accounting estimates. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group does not expect the impact to be significant. Amendments to IAS 12 \u2013 Income Tax: \u2018Deferred Tax related to Assets and Liabilities arising from a Single Transaction\u2019 These amendments, issued in May 2021, clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The group does not expect the impact to be significant. Amendments to IAS 1 \u2013 Presentation of Financial Statements: \u2018Classification of Liabilities as Current or Non-Current\u2019 These amendments, issued in January 2020, clarify the existing requirements for classifying liabilities as current or non-current. The amendments are effective for annual reporting periods beginning on or after 1 January 2024, subject to UK endorsement. Amendments to IAS 1 \u2013 Presentation of Financial Statements: \u2018Non-current Liabilities with Covenants\u2019 These amendments, issued in October 2022, clarify that only covenants with which an entity must comply on or before the reporting date will affect a liability\u2019s classification as current or non-current. The amendments are effective for annual reporting periods beginning on or after 1 January 2024, subject to UK endorsement. Amendments to IFRS 16 \u2013 Leases: \u2018Lease Liability in a Sale and Leaseback\u2019 These amendments, issued in September 2022, specify requirements for seller-lessees to measure the lease liability in a sale and leaseback transaction. The amendments are effective for annual reporting periods beginning on or after 1 January 2024, subject to UK endorsement. ", "dimensions": { "concept": "ifrs-full:DescriptionOfExpectedImpactOfInitialApplicationOfNewStandardsOrInterpretations", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-604": { "value": "(v) Critical accounting policies and the use of estimates The preparation of the financial statements includes the use of estimates and assumptions which affect items reported in the Consolidated Balance Sheet and Consolidated Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management\u2019s best knowledge of current circumstances and future events and actions, material adjustments could be made to the carrying amounts of assets and liabilities within the next financial year. The Audit Committee reviews the reasonableness of judgements associated with and the application of significant accounting policies. The significant accounting matters considered by the Audit Committee in respect of the year ended 31 December 2022 are included within the Audit Committee Report on page 88. The major areas of critical accounting judgement on policy application are considered below: Insurance and investment contract liabilities (Notes 20 and 21): Product classification and the assessment of the significance of insurance risk transferred to the group in determining whether a contract should be accounted for as an insurance or investment contract. Contracts which transfer significant insurance risk to the group are classified as insurance contracts. Contracts that transfer financial risk (e.g. change in interest rate or security price) to the group but not significant insurance risk are classified as investment contracts. Judgement is required in order to assess the significance of the transfer of insurance risk within a contract. This assessment is based on whether the occurrence of an insured event could cause the group to make significant additional payments, i.e. if the occurrence of the event causes significantly higher cash out flows for the group than its non-occurrence. Certain contracts, which are both insurance and investment, can contain discretionary participating features representing the contractual right to receive additional benefits as a supplement to guaranteed benefits under certain conditions, being: \u2022 that the additional benefits are a significant portion of the total contractual benefits; \u2022 the amount and timing of the additional benefits is at the discretion of the group; and \u2022 that the additional benefits are contractually dependent upon the performance of a company, fund or specified pool of assets. Insurance contracts and investment contracts with such discretionary participation features are accounted for under IFRS 4, while investment contracts without discretionary participation features are accounted for as financial instruments under IAS 39. Judgement is therefore required in order to establish whether any additional benefits in an insurance or investment contract meet the above requirements for being considered discretionary participation features. 1 Basis of preparation continued Consolidation (Notes 42 to 44): Assessment of whether the group controls underlying entities and should therefore consolidate them. The assessment takes account of various criteria, including decision making ability, equity holding and the rights to a variable return from the entity. Control arises when the group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. For operating entities this generally accompanies a shareholding of 50% or more in the entity. Subsidiaries that are consolidated where the group owns less than 50% of the ordinary share capital (structured entities), are consolidated based on an assessment of control normally arising from special rights attaching to the class of share owned, other contractual arrangements and factors such as the purpose of the investee, the nature of its relevant activities, voting rights (including potential voting rights) and substantive and protective rights. The group invests in various fund and unit trust entities where it also acts as the asset manager to those entities. In these instances, in determining whether the group controls the entities, the assessment focuses on the aggregate economic interests of the group (direct interest and expected management fees) and on whether the group acts as a principal or agent. This includes an assessment of the removal rights of other investors (their practical ability to allow the group not to control the fund). Additionally, holdings in such investments can fluctuate on a daily basis according to the participation of the group and other investors in them. As a result, in determining control, we look at an assessment of these factors over a longer period to mitigate the impact of daily fluctuations which do not reflect the wider facts and circumstances of the group\u2019s involvement. This is performed in line with the following principles: \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity exceeds 50%, the group is judged to have control over the entity; \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity is between 30% and 50%, the facts and circumstances of the group\u2019s involvement in the entity are considered, including the rights to any fees earned by the asset manager from the entity, in forming a judgement as to whether the group has control over the entity; and \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity is less than 30%, the group is judged to not have control over the entity, but again the facts and circumstances of the group\u2019s involvement in the entity are considered. The following sets out information about the critical accounting assumptions made by the group about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year : Valuation of insurance and investment contract liabilities (Notes 18 to 21) The key judgements around the valuation of insurance and investment contract liabilities relate to the following assumptions: \u2022 Determination of the longevity, mortality and morbidity assumptions used in the calculation of the insurance contract liabilities; the assumptions for the rate of future longevity, mortality and morbidity are based on the group\u2019s internal experience and judgements about how experience may vary in the future. This assessment takes into account market benchmarking, internal experience studies and independent industry data. \u2022 Determination of the expense assumptions used in the calculation of the insurance liabilities. These represent the expected future costs of administering the underlying insurance policies, and are based on management\u2019s best estimate of these future costs, and on an appropriate allocation between servicing new and existing business. \u2022 Determination of valuation interest rates used to discount the liabilities, which are sensitive to the assumptions made, for example, on credit default of the backing assets. These assumptions take into account consideration of market experience and historic internal data. The valuation interest rate is also sensitive to the selection of assets chosen to back the liabilities. \u2022 Determination of the target long-term asset portfolio at certain period ends, depending on the quantum and timing of pension risk transfer (PRT) volumes. This assumption is used to present LGRI and Retail Retirement new business metrics. Insurance and investment contract liabilities are of a long-term nature, and as such, the ultimate impact of Covid-19 will emerge over a long period of time. As at 31 December 2022, there was insufficient certainty in more recent data to revise long-term assumptions in response to emerging claims experience relating to the effects of the pandemic, with the exception of certain short-term allowances in protection contracts. Note 19 includes a sensitivity analysis on pre-tax group profit and group equity to reasonable alternative assumptions. Valuation of unquoted illiquid assets and investment property (Note 10) \u2022 Determination of fair value of unquoted and illiquid assets, and investment property involves judgements in model valuations, through the incorporation of both observable and unobservable market inputs, which include assumptions that lead to the existence of a range of plausible valuations for financial assets. In assessing asset valuation, in line with applicable standards and guidance, the group has both projected the short-term impact on earnings and cash flows of the current market volatility, while continuing to review the assets\u2019 ability to deliver longer term returns aligned to their investment cases. Note 10 includes a sensitivity analysis on the fair value of unquoted illiquid assets and investment property to reasonable alternative assumptions Defined benefit pension plan (Note 23) \u2022 Determination of pension plan assumptions including mortality, discount rates and inflation; these assumptions have been set in accordance with the requirements of IAS 19, \u2018Employee Benefits\u2019 and include consistent judgements with those in setting the annuity liabilities where possible. Note 23 includes a sensitivity analysis to reasonable alternative assumptions. (vi) Consideration of climate change The group is exposed to climate change through two broad categories: transition risks from the move to a low-carbon economy and the impact this has on asset valuation and the economy; and physical risks from the impact on asset holdings as a result of severe weather events and longer-term shifts in climate. The group has integrated climate risk management into its governance framework and has carried out a detailed assessment of how we could expect climate risk to emerge across our business model. The group risk mitigation strategy includes setting portfolio carbon intensity targets, integrating carbon controls into the investment processes through stock exclusions and high carbon escalation, corporate engagement and implementing high energy efficiency standards into the group\u2019s directly owned commercial property and housing businesses. The group is committed to net zero, targeting a 1.5\u00b0C \u2018Paris\u2019 outcome. In order to meet its environmental goals, the group has set for itself a number of metrics and targets, clearly linked with its business strategy and risk management controls. These are based on a three-pillar climate strategy encompassing \u2018Invest, Influence and Operate\u2019. Metrics and targets have been defined around the group\u2019s operational carbon footprint, investment portfolio economic carbon intensity, and implied portfolio temperature alignment. These are being targeted through the decarbonisation of the group\u2019s balance sheet, investments in clean energy and start-ups, development of climate friendly investment products, and focus on own operations. The group also continues to use its influence as a large investor to promote the transition. Scenario analysis is performed to help understand the strategic implications of possible climate pathways, including the key features of a transition to a net zero economy. Plausible scenarios have been developed based on estimations of how the energy system may evolve over the next 30 years, using the most recent carbon budgets from the Intergovernmental Panel on Climate Change\u2019s Sixth Assessment Report (AR6) and incorporate latest data on technology costs. These include two different pathways to \u2018below 2\u00b0C\u2019, and a scenario assuming achievement of net zero. Given the group\u2019s long-term climate risk relates to transition risk, a fourth scenario assuming global failure to act on climate change and emissions growth at historical rates has been modelled, but the impacts have not been applied to our portfolio. Such impacts are driven by physical risks which tend to be highly localised and manifest further into the future and are therefore more uncertain. In preparing the consolidated financial statements, the group has considered the impact of climate change, and in particular the transition to a lower carbon economy, on the valuation of the group\u2019s asset and liabilities. In the strategic report, and more fully in the group\u2019s climate report, we have set out in detail the various risks and opportunities that are created by this transition, and how they may impact the group across various time horizons. In the group\u2019s climate report, in line with the recommendations of the Task Force on Climate-related Financial Disclosures, we have further described the resilience of the group\u2019s strategy, taking into consideration different climate-related scenarios, as described above. There is no one single scenario that underpins the financial statements. The scenarios help challenge the group\u2019s perspectives on the future business and economic environment as a result of the transition to a lower carbon economy, including consideration of events that may be only remotely possible. As a result, scenarios included in the group\u2019s climate report are not intended to be predictions of likely future events or outcomes and are not the basis on which the group\u2019s consolidated financial statements have been prepared. At the current time, the group does not consider climate risk to represent a significant area of judgement or of estimation uncertainty. As at 31 December 2022, no material impacts on the group\u2019s financial position, nor on the valuation of assets or liabilities on the group\u2019s Consolidated Balance Sheet as a result of climate change risk have been identified. In arriving at this determination, the group has in particular taken into account the following areas of judgement, which we consider to be those most exposed to the potential impact of climate change in the preparation of the financial statements: Going concern and viability In preparing the consolidated financial statements, the directors are required to assess the group\u2019s ability to continue as a going concern, by taking into account all available information related to at least 12 months from the date of their approval. Additionally, the preparation of the viability statement takes into consideration the group\u2019s overall business model and strategy, forecast financial strength and resilience, and the liquidity profile over the planning horizon. Climate-related matters have been considered as part of these assessments and have not been deemed to create material uncertainties as to their conclusions or to require specific disclosure. Valuation of Level 3 financial investments and investment property The valuation of unquoted illiquid assets and investment property has been separately identified as an area of significant estimation uncertainty. The assumptions used in the models underpinning these assets\u2019 valuations, such as cash flows forecasts, discount rates, and multiples, are often unobservable. Due to the need to apply significant judgements, these assumptions can be impacted by transition risk, with climate-related inputs gaining more traction (e.g. construction methods and materials, EPC ratings, ESG credentials and climate resilience). This is particularly relevant for the group\u2019s direct investments portfolio, including alternative assets. Where possible, the group\u2019s assets are valued using standard market pricing sources or appropriately qualified external valuers, and therefore reflect current market sentiments around climate risk. In this respect market and investor expectations have also been evolving, with greater demand towards net zero-aligned assets, and away from traditional carbon-intensive methods, impacting expected investor returns and therefore discount rates and multiples. Exposure to the risks of climate change is minimised, through rigorous assessment of potential investments and active monitoring of the carbon intensity of the current portfolio. Additionally, investment properties are being reviewed by independent third parties, where applicable, with regards to potential retrofitting, to help reduce carbon emissions and make them more efficient and sustainable for the future. 1 Basis of preparation continued Asset impairment and residual economic life The carrying value of certain tangible and intangible assets on the Consolidated Balance Sheet which are subject to impairment testing could be affected by climate change risk. For example, inventory may become obsolete or restricted, causing selling prices to decline or their costs of completion to increase. If, as a result, the cost of inventories is not recoverable, they would need to be written down to their net realisable value. Property, plant and equipment, right-of-use assets, goodwill and other intangible assets may see their recoverable amount decrease in light of climate change, and significant changes in the environment (including for example changes in regulation) in which the group operates, where adverse effects can represent an indication of impairment. The estimation of recoverable amount as \u2018value in use\u2019 requires an assessment of future expected cash flows based on assumptions potentially affected by climate related matters, particularly for intangible assets, which are subject to a higher degree of judgement. Where assets are subject to amortisation or depreciation, consideration needs to be given to whether climate risk suggests that the residual economic life is shorter than anticipated, which would give rise to increased charges in the income statement. Due to the nature of the group\u2019s tangible and intangible assets, we do not anticipate any material additional impairments or increased amortisation and depreciation charges to arise from climate change. Risks will continue to be monitored against judgements and estimates used in the assessment of impairment. Provisions and contingent liabilities The recognition, measurement and disclosure of provisions and contingent liabilities is subject to setting assumptions around future events and the probability of their occurrence. Climate-related matters could affect these elements, for example by requiring recognition or disclosure of a legal obligation (e.g. levies imposed for failing climate-related targets) or of a constructive obligation (e.g. requirements to remediate environmental damage caused by the group\u2019s operations and investment portfolios). Deferred tax assets Deferred tax assets are recognised for deductible temporary differences and unused tax losses and credits, to the extent it is probable that future taxable profit will be available, against which those amounts can be utilised. Climate-related matters could affect the group\u2019s estimate of future taxable profits, and therefore it may be required to derecognise deferred tax assets previously on the balance sheet. Share-based payments The group\u2019s performance share plans provide a direct and transparent link between executive pay and the delivery of shareholder returns over the longer-term. They are a conditional award of shares subject to a performance period of at least three years. Performance metrics for the group\u2019s share plans are now clearly linked to ESG metrics. As such, the effects of climate change could have an impact on amount and timing, recognition and measurement of amounts in the group\u2019s income statement. Retirement benefit obligations Depending on their features, the valuation of plan assets included in the group\u2019s defined benefit pension schemes may be impacted by climate-related risk, as described above, and therefore the carrying value of the net deficit on the group\u2019s balance sheet could be affected. Financial instruments Under IFRS 9, \u2018Financial Instruments\u2019, effective from 1 January 2023, expected credit losses are required to be recognised on receivables and certain financial investments, representing the counterparty\u2019s probability of default over a certain time horizon. Climate-related matters may affect the group\u2019s exposure to these losses, for example by negatively affecting the borrower\u2019s ability to meet their obligations, or by affecting assumptions used in the models adopted to estimate expected credit losses. (vii) Consolidation principles Subsidiary undertakings The consolidated financial statements incorporate the assets, liabilities, equity, income, expenses and cash flows of the company and of its subsidiary undertakings drawn up to 31 December each year. All intra-group balances, transactions, income and expenses are eliminated in full. Subsidiaries are those entities (including special purpose entities, mutual funds and unit trusts) over which the group directly or indirectly has control (i.e. when the group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee) (Note 42). Profits or losses of subsidiary undertakings sold or acquired during the year are included in the consolidated results up to the date of disposal or from the date of gaining control. Puttable instruments held by external parties in consolidated investment vehicles, such as unit trusts, are classified as liabilities and appear as \u2018Net asset value attributable to unit holders\u2019 in the Consolidated Balance Sheet. Associates and joint ventures The group has interests in associates and joint ventures (Note 43) which form part of an investment portfolio held through private equity vehicles, mutual funds, unit trusts and similar entities. In accordance with the choice permitted by IAS 28, \u2018Investments in associates\u2019, these interests have been classified as fair value through profit or loss and measured at fair value within financial investments, with changes in fair value recognised in the Consolidated Income statement. Associates and joint ventures which do not form part of an investment portfolio are initially recognised in the Consolidated Balance Sheet at cost. The carrying amount of these investments is increased or decreased to reflect the group\u2019s share of total comprehensive income after the date of the acquisition ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-630": { "value": "Consolidation (Notes 42 to 44): Assessment of whether the group controls underlying entities and should therefore consolidate them. The assessment takes account of various criteria, including decision making ability, equity holding and the rights to a variable return from the entity. Control arises when the group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. For operating entities this generally accompanies a shareholding of 50% or more in the entity. Subsidiaries that are consolidated where the group owns less than 50% of the ordinary share capital (structured entities), are consolidated based on an assessment of control normally arising from special rights attaching to the class of share owned, other contractual arrangements and factors such as the purpose of the investee, the nature of its relevant activities, voting rights (including potential voting rights) and substantive and protective rights. The group invests in various fund and unit trust entities where it also acts as the asset manager to those entities. In these instances, in determining whether the group controls the entities, the assessment focuses on the aggregate economic interests of the group (direct interest and expected management fees) and on whether the group acts as a principal or agent. This includes an assessment of the removal rights of other investors (their practical ability to allow the group not to control the fund). Additionally, holdings in such investments can fluctuate on a daily basis according to the participation of the group and other investors in them. As a result, in determining control, we look at an assessment of these factors over a longer period to mitigate the impact of daily fluctuations which do not reflect the wider facts and circumstances of the group\u2019s involvement. This is performed in line with the following principles: \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity exceeds 50%, the group is judged to have control over the entity; \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity is between 30% and 50%, the facts and circumstances of the group\u2019s involvement in the entity are considered, including the rights to any fees earned by the asset manager from the entity, in forming a judgement as to whether the group has control over the entity; and \u2022 where the entity is managed by a group asset manager, and the group\u2019s ownership holding in the entity is less than 30%, the group is judged to not have control over the entity, but again the facts and circumstances of the group\u2019s involvement in the entity are considered. The following sets out information about the critical accounting assumptions made by the group about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-605": { "value": "(viii) Product classification The group\u2019s products are classified for accounting purposes as either insurance or investment contracts. The basis of accounting for these products is outlined in Notes 20 and 21 respectively. The following table summarises the classification of the group\u2019s significant types of non-participating insurance and investment contracts as well as investment products as described in Note 6 for each applicable reportable segment. Reportable segment Non-participating insurance contracts Non-participating investment contracts and investment products LGRI \u2022 Pension risk transfers \u2022 Longevity insurance \u2022 Assured payment policies Retail \u2022 UK Retail protection \u2022 UK Group protection \u2022 US protection \u2022 US Universal life \u2022 Individual annuities \u2022 Lifetime Care Plan \u2022 Lifetime mortgages \u2022 Fixed term individual annuities \u2022 Retirement interest only mortgages \u2022 Workplace savings LGIM \u2022 Institutional Pension \u2022 Segregated investment management mandates \u2022 Collective Investment Schemes ", "dimensions": { "concept": "legalandgeneral:DisclosureOfProductClassification", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-606": { "value": "(ix) Fiduciary activities Assets associated with fiduciary activities and the income arising from those assets, together with associated commitments to return such assets to customers, are not included in these financial statements. Where the group acts in a fiduciary capacity, for instance as a trustee or agent, it has no contractual rights over the assets concerned. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfFiduciaryActivities", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-607": { "value": "(x) Foreign exchange and exchange rates Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. The functional currency of the group\u2019s foreign operations is the currency of the primary economic environment in which the entity operates. The assets and liabilities of all of the group\u2019s foreign operations are translated into sterling, the group\u2019s presentation currency, at the closing rate at the date of the Consolidated Balance Sheet. Income and expenses are translated at average exchange rates. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to a separate component of shareholders\u2019 equity. Foreign exchange gains and losses are recognised in the Consolidated Income Statement, except when recognised in equity as qualifying cash flow or net investment hedges. The closing exchange rates at 31 December 2022 were 1.21 United States dollar and 1.13 euro (31 December 2021: 1.35 United States dollar and 1.19 euro). The average exchange rates for the year ended 31 December 2022 were 1.24 United States dollar and 1.17 euro (31 December 2021: 1.38 United States dollar and 1.16 euro). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-540": { "value": "2 Supplementary adjusted operating profit information (i) Reconciliation between adjusted operating profit and profit from ordinary activities after tax Profit/ Profit/ Profit/ Profit/ (loss) Tax (loss) (loss) Tax (loss) before (expense)/ after before (expense)/ after tax credit tax tax credit tax 2022 2022 2022 2021 2021 2021 Notes \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Legal & General Retirement Institutional (LGRI)1 2(iii) 1,257 (179) 1,078 1,154 (170) 984 Legal & General Capital (LGC) 509 (105) 404 461 (82) 379 Legal & General Investment Management (LGIM) 340 (47) 293 422 (80) 342 Retail 2(iii) 825 (155) 670 620 (90) 530 \u2013 Insurance 2 341 (88) 253 268 (41) 227 \u2013 Retail Retirement 1 484 (67) 417 352 (49) 303 Adjusted operating profit from divisions/(tax expense) on divisions 2,931 (486) 2,445 2,657 (422) 2,235 Group debt costs3 (214) 41 (173) (230) 44 (186) Group investment projects and expenses (194) 42 (152) (165) 28 (137) Adjusted operating profit/(tax expense) 2,523 (403) 2,120 2,262 (350) 1,912 Investment and other variances 2(iv) 137 34 171 233 (95) 138 Losses on non-controlling interests (1) \u2013 (1) (7) \u2013 (7) Profit for the year/(tax expense) for the year4 2,659 (369) 2,290 2,488 (445) 2,043 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. Further details are provided in Note 28. 2. Insurance operating profit includes \u00a3168m (2021: \u00a3(52)m) related to the group\u2019s US Insurance business. 3. Group debt costs exclude interest on non-recourse financing. 4. Profit/(loss) before tax reflects the adjusted profit before tax attributable to equity holders. This supplementary adjusted operating profit information (one of the group\u2019s key performance indicators) provides additional analysis of the results reported under IFRS, and the group believes it provides stakeholders with useful information to enhance their understanding of the performance of the business in the year. Adjusted operating profit measures the pre-tax result excluding the impact of investment volatility, economic assumption changes caused by changes in market conditions or expectations and exceptional items. It therefore reflects longer-term economic assumptions for the group\u2019s insurance businesses and shareholder funds, including the traded portfolio in LGC. For the group\u2019s direct investments, operating profit reflects the expected long-term economic return for those assets which are developed with the intention of sale, or the IFRS profit before tax for the early stage and mature businesses. Variances between actual and long-term expected investment return on traded and real assets (including direct investments where applicable) are excluded from operating profit, as well as economic assumption changes caused by changes in market conditions or expectations (e.g. credit default and inflation) and any difference between the actual allocated asset mix and the target long-term asset mix on new pension risk transfer business. Adjusted operating profit also excludes the yield associated with assets held for future new pension risk transfer business from the valuation discount rate on insurance contract liabilities. Exceptional income and expenses which arise outside the normal course of business in the year, such as merger and acquisition and start-up costs, are also excluded from adjusted operating profit. The group reports its results across the following business segments: \u2022 LGRI represents worldwide pension risk transfer business including longevity insurance. \u2022 LGC represents shareholder assets invested in direct investments primarily in the areas of specialist commercial real estate, clean energy, housing and SME finance, as well as traded and treasury assets. \u2022 LGIM represents institutional and retail investment management. \u2022 Insurance primarily represents UK protection (both group and retail) and Fintech business, as well as US retail protection business (US Insurance). \u2022 Retail Retirement primarily represents retail annuity and drawdown products, workplace savings and lifetime mortgage loans. (ii) Reconciliation of release from operations to adjusted operating profit before tax New Operating Release business Net release Changes in Operating Tax profit/(loss) from surplus/ from Experience valuation Non-cash profit/(loss) expense/ before operations 1 (strain) operations variances assumptions items Other 2 after tax Fortheyearended (credit) tax 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m LGRI 3 620 298 918 (15) 177 (2) \u2013 1,078 179 1,257 LGC 404 \u2013 404 \u2013 \u2013 \u2013 \u2013 404 105 509 LGIM 293 \u2013 293 \u2013 \u2013 \u2013 \u2013 293 47 340 Retail 554 (4) 550 (45) 205 (16) (24) 670 155 825 \u2013 Insurance 308 (12) 296 (12) 7 (14) (24) 253 88 341 \u2013 Retail Retirement 3 246 8 254 (33) 198 (2) \u2013 417 67 484 Total from divisions 1,871 294 2,165 (60) 382 (18) (24) 2,445 486 2,931 Group debt costs (173) \u2013 (173) \u2013 \u2013 \u2013 \u2013 (173) (41) (214) Group investment projects and expenses (73) \u2013 (73) \u2013 \u2013 \u2013 (79) (152) (42) (194) Total 1,625 294 1,919 (60) 382 (18) (103) 2,120 403 2,523 1. Release from operations within Insurance includes \u00a385m of dividends from the US Insurance business. 2. Other within Insurance includes experience variances, changes in valuation assumptions (including changes to assumed asset allocation) and non-cash items for US Insurance. 3. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Further details are provided in Note 28. Release from operations for LGRI, and the UK protection and retail annuity businesses within Retail represents the expected IFRS surplus generated in the year from the difference between the prudent assumptions underlying the IFRS liabilities and our best estimate of future experience. For workplace savings within Retail Retirement, the release from operations represents the expected annual management charges generated from the in-force business less expected expenses. The Insurance release from operations also includes dividends remitted from US Insurance business and IFRS profit after tax for the Fintech business. New business surplus/(strain) for LGRI, and the UK protection and retail annuity businesses within Retail represents the initial profit or loss from writing new business. This includes the costs associated with acquiring new business and setting up prudent reserves, net of tax. Similarly for workplace savings, this includes the cost of acquiring new business in the year less the annual management charges generated by the assets under administration (AUA), net of tax. The new business surplus and release from operations for LGRI and Retail excludes any capital held in excess of the prudent reserves from the liability calculation. LGRI and Retail Retirement\u2019s annuity new business metrics are presented based on a single target long-term asset portfolio. At certain year ends, depending upon the quantum and timing of pension risk transfer (PRT) volumes, we may have sourced more or less of the high quality assets targeted to support that business. At year end, the profit impact of the difference between actual assets held (including alternative surplus assets where suitable) and the long-term asset mix is reflected in investment variance. Net release from operations for LGRI and Retail is defined as release from operations plus new business surplus/(strain). Release from operations and net release from operations for LGC and LGIM represents the adjusted operating profit (net of tax). See Note 2 (iii) for more detail on experience variances, changes to valuation assumptions and non-cash items . 2 Supplementary adjusted operating profit information continued (ii) Reconciliation of release from operations to adjusted operating profit before tax continued New business surplus/ (strain) Net release from operations Changes in valuation assumptions Operating profit/(loss) after tax Operating profit/(loss) before tax Release from operations 1 Experience variances Non-cash items Other 2 Tax expense/ (credit) For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m LGRI 3 512 193 705 40 212 27 \u2013 984 170 1,154 LGC 379 \u2013 379 \u2013 \u2013 \u2013 \u2013 379 82 461 LGIM 342 \u2013 342 \u2013 \u2013 \u2013 \u2013 342 80 422 Retail 463 54 517 28 121 2 (138) 530 90 620 \u2013 Insurance 236 27 263 14 82 6 (138) 227 41 268 \u2013 Retail Retirement 3 227 27 254 14 39 (4) \u2013 303 49 352 Total from divisions 1,696 247 1,943 68 333 29 (138) 2,235 422 2,657 Group debt costs (186) \u2013 (186) \u2013 \u2013 \u2013 \u2013 (186) (44) (230) Group investment projects and expenses (69) \u2013 (69) \u2013 \u2013 \u2013 (68) (137) (28) (165) Total 1,441 247 1,688 68 333 29 (206) 1,912 350 2,262 1. Release from operations within Insurance includes \u00a380m of dividends from the US Insurance business. 2. Other within insurance includes experience variances, changes in valuation assumptions (including changes to assumed asset allocation) and non-cash items for US Insurance. 3. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. Further details are provided in Note 28. (iii) Analysis of LGRI and Retail adjusted operating profit LGRI 1 Retail 1 LGRI 1 Retail 1 2022 2022 2021 2021 For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Net release from operations 918 550 705 517 Experience variances \u2013 Persistency (1) (7) 1 (5) \u2013 Mortality/morbidity 37 17 24 29 \u2013 Expenses (15) (15) 6 (1) \u2013 Project and development costs (16) (6) (11) (19) \u2013 Other (20) (34) 20 24 Total experience variances (15) (45) 40 28 Changes in valuation assumptions \u2013 Persistency \u2013 (10) \u2013 (5) \u2013 Mortality/morbidity 2,3 174 229 153 46 \u2013 Expenses \u2013 (13) \u2013 (1) \u2013 Other 4 3 (1) 59 81 Total changes in valuation assumptions 177 205 212 121 Movement in non-cash items (2) (16) 27 2 Other 5 \u2013 (24) \u2013 (138) Operating profit after tax 1,078 670 984 530 Tax expense 179 155 170 90 Operating profit before tax 1,257 825 1,154 620 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. Further details are provided in Note 28. 2. The positive impact of changes in Mortality/morbidity valuation assumptions in Retail is driven by routine longevity assumption changes in 2022, for which an update to the base mortality assumption is the largest component of the movement. We have adopted a modified CMI 2020 model, with no weight given to 2020 data due to the uncertainty in the data created by Covid-19. 3. In both 2022 and 2021, changes in valuation assumptions for Mortality/morbidity in LGRI reflect updates to UK longevity trend and spouse demography assumptions. 4. In 2021, the \u00a381m positive Other changes in valuation assumptions in Retail reflected the benefit of modelling improvements in UK retail protection, including the introduction of an illiquidity premium in the liability discount rate. 5. Other includes experience variances, changes in valuation assumptions (including changes to assumed asset allocation) and non-cash items relating to US Insurance, which also includes the benefits from reinsuring the in-force universal life book of protection business (iv) Investment and other variances 2022 2021 \u00a3m \u00a3m Investment variance related to protection liabilities1 841 111 Investment variance related to the traded investment portfolio and direct investments2 (408) 19 Other investment variance3 (164) 211 Investment variance 269 341 M&A related and other variances 4 (132) (108) Total investment and other variances 137 233 1. The positive investment variance in protection liabilities of \u00a3841m reflects the formulaic impact of the increases in UK and US government bond yields which have resulted in higher discount rates being used to calculate the group\u2019s protection liabilities. 2. The negative investment variance in the traded investments portfolio and direct investments of \u00a3408m largely reflects volatile global equity market performance in the traded investment portfolio, as well as the revaluation of some land assets and development projects as a result of higher interest rates. 3. Other investment variance includes the IAS 19 movements in respect of the group\u2019s defined benefit pension schemes. 4. M&A related and other variances include gains and losses, expenses and intangible amortisation relating to acquisitions, disposals and restructuring as well as business start-up costs. Investment variance includes differences between actual and long-term expected investment return on traded and real assets (including direct investments developed with the intention of sale), the impact of economic assumption changes caused by changes in market conditions or expectations (e.g. credit default and inflation), the impact of any difference between the actual allocated asset mix and the target long-term asset mix on new pension risk transfer business, and the yield associated with assets held for future new pension risk transfer business from the valuation discount rate. The long-term expected investment return is based on opening economic assumptions applied to the assets under management at the start of the reporting year. The assumptions underlying the calculation of the expected returns for traded equity, commercial property and residential property are based on market consensus forecasts and long-term historic average returns expected to apply through the cycle. The long-term expected investment returns are: 2022 2021 Equities 7% 7% Commercial property 5% 5% Residential property 1 3.5% RPI + 50bps 1. In previous years the assumption RPI + 50bps was in line with average historical returns. Due to the current spike in inflation and in order to keep the rate aligned to average historical returns, it was updated to 3.5% in 2022. Additionally, the LGC alternative asset portfolio comprises investments in specialist commercial real estate, clean energy, housing and SME finance. The long-term expected investment return across the portfolio is on average between 10% and 12% (2021: 8% and 10%), in line with our stated investment objectives. Rates of return specific to each asset are determined at the point of underwriting and reviewed and updated annually. The expected investment return includes assumptions on appropriate discount rates and inflation as well as sector specific assumptions including retail and commercial property yields and power prices. ", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-541": { "value": "3 Other expenses An analysis of other expenses is set out below: 2022 2021 Notes \u00a3m \u00a3m Staff costs (including pension costs and share-based payments) 32 1,194 1,014 Redundancy costs 4 4 Lease rentals 1 \u2013 4 Auditor\u2019s remuneration 31 18 12 Depreciation and impairment of plant and equipment 57 53 Amortisation and impairment of other intangible assets 9 46 89 House building expenses2 1,123 1,072 Other administrative expenses 890 860 Total other expenses 3,332 3,108 1. Lease rentals represent expenses on short-term leases or low value leases. 2. House building expenses represent the cost of sales of the group\u2019s housing businesses, including CALA Homes. A total of \u00a31,429m (2021: \u00a31,314m) of house building income has been recognised in the year (see Note 28 (ii) (d)). ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-542": { "value": "Interim dividends on ordinary shares are deducted from retained earnings in the period in which they are paid. Final dividends on ordinary shares are recognised as a liability in the period in which they have been approved by shareholders of the company. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-543": { "value": "Dividend Per share 1 Dividend Per share 1 2022 2022 2021 2021 \u00a3m p \u00a3m p Ordinary dividends paid and charged to equity in the year: \u2013 Final 2020 dividend paid in June 2021 \u2013 \u2013 754 12.64 \u2013 Interim 2021 dividend paid in September 2021 \u2013 \u2013 309 5.18 \u2013 Final 2021 dividend paid in June 2022 792 13.27 \u2013 \u2013 \u2013 Interim 2022 dividend paid in September 2022 324 5.44 \u2013 \u2013 Total dividends 1,116 18.71 1,063 17.8 2 Ordinary share dividend proposed 829 13.93 790 13.27 1. The dividend per share calculation is based on the number of equity shares registered on the ex-dividend date. Subsequent to 31 December 2022, the directors declared a final dividend for 2022 of 13.93 pence per ordinary share. This dividend will be paid on 5 June 2023. It will be accounted for as an appropriation of retained earnings in the year ended 31 December 2023 and is not included as a liability in the Consolidated Balance Sheet as at 31 December 2022. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-544": { "value": "Earnings per share is a measure of the portion of the group\u2019s profit allocated to each outstanding share. It is calculated by dividing net income attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares. For this purpose, net income is defined as the profit after tax, attributable to equity holders of the company, derived from continuing operations. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all dilutive potential ordinary shares, such as share options granted to employees. Potential or contingent share issuances are treated as dilutive when their conversion to shares would decrease net earnings per share. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-545": { "value": "(i) Basic earnings per share After tax Per share 1 After tax Per share1 2022 2022 2021 2021 \u00a3m p \u00a3m p Profit for the year attributable to equity holders 2,291 38.72 2,050 34.58 Less: coupon payable in respect of restricted Tier 1 convertible notes net of tax relief (23) (0.39) (23) (0.39) Total basic earnings 2,268 38.33 2,027 34.19 1. Basic earnings per share is calculated by dividing profit after tax by the weighted average number of ordinary shares in issue during the year, excluding employee scheme treasury shares. (ii) Diluted earnings per share After tax Weighted average number of shares Per share 1 2022 2022 2022 \u00a3m m p Profit for the year attributable to equity holders 2,291 5,917 38.72 Net shares under options allocable for no further consideration \u2013 55 (0.36) Conversion of restricted Tier 1 notes \u2013 307 (1.87) Total diluted earnings 2,291 6,279 36.49 Weighted average number of After tax shares Per share 1 2021 2021 2021 \u00a3m m p Profit for the year attributable to equity holders 2,050 5,929 34.58 Net shares under options allocable for no further consideration \u2013 59 (0.34) Conversion of restricted Tier 1 notes \u2013 307 (1.67) Total diluted earnings 2,050 6,295 32.57 1. For diluted earnings per share, the weighted average number of ordinary shares in issue, excluding employee scheme treasury shares, is adjusted to assume conversion of all potential ordinary shares, such as share options granted to employees and conversion of restricted Tier 1 notes. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-546": { "value": "6 Principal products A significant part of the group\u2019s business involves the acceptance and management of risk. A description of the principal products offered by the group\u2019s segments is outlined below. The group seeks to manage its exposure to risk through controls which ensure that the residual exposures are within acceptable tolerances agreed by the Board. The group\u2019s risk appetite framework and the methods used to monitor risk exposures can be found on pages 52 to 59. Details of the risks associated with the group\u2019s principal products and the controls used to manage these risks can be found in Notes 7 and 15 to 17. Legal & General Retirement Institutional (LGRI) Annuity contracts Pension Risk Transfer (PRT) represents bulk annuities, whereby the group accepts the assets and liabilities of a company pension scheme or a life fund. Annuities provide guaranteed income for a specified time, usually the life of the policyholder and may include a guaranteed payment period. PRT business consists of both immediate and deferred annuities. Immediate annuities provide a regular income stream to the policyholder and are in payment at the date of the transaction. Deferred annuities provide a regular income stream to the policyholder where the income stream starts at a future date after the transaction. Some deferred contracts accepted by the group contain guaranteed cash options, predominantly minimum factors for commuting part of the annuity income into cash at the date of vesting. There is a block of immediate and deferred annuities within the UK business with benefits linked to changes in the RPI or for a minority the CPI, but with contractual maximum or minimum increases. Impact on profit due to changes in inflation can be found within the IFRS sensitivity analysis note. Investment contracts The group writes Assured Payment Policies (APP). An APP is a long-term contract under which the policyholder (a registered UK pension scheme) pays a day-one premium and in return receives a contractually fixed and/or inflation-linked set of payments over time from the insurer. Longevity insurance contracts The group also provides longevity insurance products for company pension schemes, under which regular payments are made to the scheme reflecting their actual longevity experience, while the scheme makes an agreed set of regular payments in return. Some policies contain a guaranteed surrender value which is currently immaterial. Legal & General Investment Management (LGIM) LGIM offers both active and passive management on either a pooled or segregated basis to clients domiciled globally. Assets are managed in London and Chicago on behalf of pension funds, institutional clients, sovereign wealth clients, retail clients and subsidiary companies within the group. The key products provided by LGIM are unit linked Institutional Pensions, Segregated investment management mandates and Collective Investment Schemes. The core strategies applied for managing the products are set out below. Index fund management LGIM provides a diversified range of pooled index funds, providing a wide choice and the ability to pursue specific benchmarks efficiently. In addition, segregated solutions are offered to institutional clients providing large scale customisation against established market capitalisation weighted and alternative indices. The LGIM ETF business provides clients access to LGIM\u2019s index fund management capabilities via our Exchange Traded Fund platform. ETF products cover a broad range of traditional and thematic asset classes. Active strategies LGIM offers a range of pooled and segregated active fixed income funds. The LGIM liquidity funds offer institutional investors a solution for their cash management requirements across a range of core currencies. The liquidity funds aim to deliver competitive returns with a high level of diversification, whilst focusing on capital preservation through portfolios of high quality, liquid assets. Active strategies also includes an active equity management business comprising focused teams managing stock selection across different regions. Solutions and Liability Driven Investment (LDI) LGIM provides a range of pooled and bespoke solutions to help de-risk defined benefit pension schemes. These solutions will usually combine active or passive underlying portfolios with derivative overlays designed to meet clients\u2019 specific requirements. An allocation strategy service is also offered to institutional clients, which may also allocate some of the portfolio to managers other than LGIM. Multi-asset funds Multi-asset funds for retail and institutional clients, built using LGIM\u2019s expertise in asset allocation which is informed by an in-house research capability. The underlying asset classes may be managed on an active or passive basis within LGIM. Real assets LGIM offers a range of pooled funds, segregated accounts and joint ventures investing on behalf of UK and overseas investors across physical real estate, private corporate debt, infrastructure debt and real estate loans. The business has specialist teams of fund and asset managers and an in-house research team. Legal & General Capital (LGC) Investment strategy and implementation Legal & General Capital manages shareholder assets which are not directly required to meet contractual obligations to policyholders. LGC\u2019s investments fall into two distinct categories; direct investments and traded assets. The value of, and income from, both categories is sensitive to conditions within investment markets and the broader economy. Potential volatility in returns is managed using a range of techniques, including foreign exchange and interest rate hedging, and exposure concentration limits by asset type, sector and geographic region. Direct investments and structuring Direct investments are an integral part of the wider group strategy. LGC\u2019s direct investments are typically illiquid investments entered into through acquisition, joint venture with strategic partners or by the creation of new companies. LGC seeks to make direct investments in sectors where there are structural funding shortfalls, and is organised into four sectors: specialist commercial real estate, clean energy, housing and SME finance. LGC deploys capital and sector expertise to such investments to target attractive risk-adjusted returns which can deliver higher returns and/or lower volatility for our shareholder capital than listed equity. Retail The Retail division comprises Insurance and Retail Retirement businesses. UK protection business (retail and group) The group offers protection products which provide mortality or morbidity benefits. They may include health, disability, critical illness and accident benefits; these additional benefits are commonly provided as supplements to main life policies but can also be sold separately. The benefit amounts would usually be specified in the policy terms. Some sickness benefits cover the policyholder\u2019s mortgage repayments and are linked to the prevailing mortgage interest rates. In addition to these benefits, some contracts may guarantee premium rates, provide guaranteed insurability benefits and offer policyholders conversion options. US protection business US protection represents individual term assurance, which provides death benefits over the medium to long-term. The contracts have level premiums for an initial period with premiums set annually thereafter. During the initial period, there is generally an option to convert the contract to a universal life contract. After the initial period, the premium rates are not guaranteed, but cannot exceed the age-related guaranteed premium. US universal life Universal life contracts written by LGA provide savings and death benefits over the medium to long-term. The savings element has a guaranteed minimum growth rate. LGA has exposure to loss in the event that interest rates decrease and it is unable to earn enough on the underlying assets to cover the guaranteed rate. LGA is also exposed to loss should interest rates increase, as the underlying market value of assets will generally fall without a change in the surrender value. Reinsurance is used within the protection businesses to manage exposure to large claims for individual term business and virtually all universal life business. These practices lead to the establishment of reinsurance assets on the group\u2019s balance sheet. Within our US business, Legal & General America (LGA), reinsurance and securitisation are also used to provide regulatory solvency relief (including relief from regulation governing term insurance). Annuities Immediate annuities have similar characteristics as products sold by LGRI. The group also offers products for individuals that provide a guaranteed level of income over a chosen fixed period of time, in exchange for an initial lump sum payment from the policyholder. The products can provide a fixed lump sum at maturity and/or options to surrender on non-guaranteed terms. Deferred annuity contracts written by LGA contain a provision that, at maturity, a policyholder may move the account value into an immediate annuity, at rates which are either those currently in effect, or rates guaranteed in the contract. 6 Principal products continued Lifetime Care Plan The Lifetime Care Plan provides a monthly payment to a UK registered care provider that helps meet the cost of care for the policyholder\u2019s life. A policyholder can choose to receive a fixed monthly payment or opt to have escalation built in. A death benefit exists within the product so that if a policyholder dies within the first 6 months of the start date a percentage of the original premium less any payments already made is payable to the estate. Lifetime mortgages Lifetime mortgages are a form of equity release mortgage that provide non-commercial borrowers with a loan secured against their main residence, without the need for regular repayments. They are regulated retail mortgages offered only to borrowers over the age of 55 through specialist intermediaries. Interest accrues over the term of the loan and is repayable at the time the principal becomes due. Loans can be advanced in a single lump sum amount or in several subsequent drawdowns of an agreed facility. All lifetime mortgages provide a \u2018no negative equity\u2019 guarantee, which means that if the loan is repaid from the sale of the property and if the net sale proceeds are lower than the balance of the loan, the group will accept the net sale proceeds as full settlement. Retirement Interest-Only mortgages A Retirement Interest-Only (RIO) mortgage is a standard residential mortgage available for non-commercial borrowers above 55 years old. A RIO mortgage is very similar to a standard interest-only mortgage, with two key differences: \u2022 The loan is usually only paid off on death, move into long-term care or sale of the house. \u2022 The borrowers only have to prove they can afford the monthly interest repayments and not the capital remaining at the end of the mortgage term. No repayment solution is required as repayment defaults to sale of property. Workplace Savings Workplace Savings provides corporate pension scheme solutions to enable companies to meet their auto-enrolment obligations. Workplace Savings acts as scheme operator and administrator for these products while the customers hold the individual or scheme level pension policies issued by Legal and General Assurance Society Limited (LGAS). ", "dimensions": { "concept": "legalandgeneral:DisclosureOfPrincipalProducts", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-547": { "value": "7 Asset risk The group is exposed to the following categories of asset risk as a consequence of offering the principal products outlined in Note 6. The group is also exposed to insurance risk as a consequence of offering these products \u2013 more detail on insurance risk can be found in Note 17. The group is not directly exposed to any market risk, credit risk or liquidity risk associated with LGIM\u2019s businesses, and as a result, the detailed risk disclosures have not been presented. However, LGIM\u2019s income is related to the value of funds under management, and so they are indirectly exposed to market risks that impact the value of assets underlying those funds. The group seeks to manage its exposures to risk through controls which ensure that the residual risk exposures are within acceptable tolerances agreed by the Board. A description of the risks associated with the group\u2019s principal products and the associated controls is detailed in the table below. Market risk Exposure to loss as a direct or indirect result of fluctuations in the value of, or income from, specific assets. Credit risk Exposure to loss if another party fails to perform its financial obligations to the group. Liquidity risk The risk that the group, though solvent, either does not have sufficient financial resources available to enable it to meet its obligations as they fall due, or can secure them only at excessive cost. Market risks Principal risks Business segment Controls to mitigate risks Investment performance risk The group is exposed to the risk that the income from, and value of, assets held to back insurance liabilities and capital requirements do not perform in line with investment and product pricing assumptions leading to a potential financial loss. Retail, LGRI and LGC Models are used to assess the impact of a range of future return scenarios on investment values and associated liabilities in order to determine optimum portfolios of invested assets. For annuities, which are sensitive to interest rate and inflation risk, analysis of the liabilities is undertaken to create a portfolio of securities, the value of which changes in line with the value of liabilities when interest rates change. For unit linked contracts, there is a risk of volatility in asset management fee income due to the impact of interest rate and market price movements on the fair value of the assets held in the linked funds, on which investment management fees are based. There is also the risk of expense over-runs should the market depress the level of charges which could be imposed. Retail and LGIM The risk is managed through maintaining a diversified range of funds in which customers may invest. The performance of linked investment funds relative to their investment objectives is subject to regular monitoring. Periodic assessment is also made of the long-term profitability to the group of these funds. For some contracts the group has discretion over the level of management charges levied. Property risk Lifetime mortgages include a no-negative equity guarantee which transfers a potential loss exposure to the group as a result of low house price inflation and an exposure to specific properties which may experience lower house price inflation for whatever reason. Retail and LGRI To mitigate the risk, maximum loan to value ratios are set for all lending with further underwriting criteria setting out acceptable properties for lending purposes. Policy terms also require properties to be fully insured and maintained, including the right of inspection. The diversification of lending by property type and geographic region seeks to control exposures to specific aspects in the property market. LGC businesses build homes across the residential market, invest in large commercial and residential development projects and manage several developed real estate assets. The group\u2019s revenue streams are exposed to residential sales achieved, as well as the volume of transactions, both of which may be affected by the performance of the housing market. Revenue streams may also be impacted by significant increases in the cost of raw materials or disruption to supply chains. Independent valuations of real estate assets, either in development or developed, also depend on an assessment of the wider real estate market. LGC Diversification by geographic region and property type avoids concentration of exposures to specific areas of the property market. Sites are developed in a number of phases to spread the risk to local markets over several years and where possible we seek to co-invest with local experts to manage assets. The purchasing of new land for development requires approval from LGC\u2019s Investment Committee and the Group Capital Committee. Where appropriate, key methods are adopted to further manage the risk, such as fixed price construction contracts, forward sales and pre-letting. These businesses can also benefit from flexible funding arrangements available from the group. Independent valuations of real estate assets, either in development or developed, also depend on an assessment of the wider real estate market. Retail and LGRI Diversification by geographic region and property type avoids concentration of exposures to specific areas of the property market. Currency risk To diversify credit risk within the annuities business corporate bond portfolio, investments are held in corporate bonds denominated in non-sterling currencies. LGC also invest in overseas assets. Fluctuations in the value of, or income from, these assets relative to liabilities denominated in sterling could result in unforeseen foreign exchange losses. Retail, LGRI and LGC To mitigate the risk of loss from currency fluctuations, currency swaps and forwards are used to hedge exposures to corporate bonds and equities denominated in currencies other than sterling. Hedging arrangements are placed with strongly rated counterparties with collateral requirements being subject to regular review and reconciliation with the counterparties. The hedges do not eliminate all currency risk and the group retains some residual risk. The consolidated international subsidiaries and financial instruments of subsidiaries are translated into sterling in the consolidated accounts. Changes in the sterling value can impact consolidated equity but may be mitigated by associated hedging transactions. Group To mitigate the risk of loss from currency translation the company continuously monitors its exposure and executes appropriate hedging transactions when necessary. Hedging arrangements are placed with strongly rated counterparties with collateral requirements being subject to regular review and reconciliation with the counterparties. Inflation risk Inflation risk is the potential of realising a loss because of relative or absolute changes in inflation rates. Annuity contracts may provide for future benefits to be paid taking account of changes in the level of inflation. Annuity contracts in payment may include an annual adjustment for movements in price indices. Retail and LGR The investment strategy for the annuities business takes explicit account of the effect of movements in price indices on contracted liabilities. Significant exposures that may adversely impact profitability are hedged using inflation swaps. Annuity contracts also typically provide for a cap and floor on the annual increase in inflation linked benefit payments. The hedges do not eliminate all inflation risk and the group retains some residual risk. Interest rate risk Interest rate risk is the risk that the group is exposed to lower returns or loss as a direct or indirect result of fluctuations in the value of, or income from, specific assets and liabilities arising from changes in underlying interest rates. Retail, LGRI, LGC and Group To mitigate the risk that guarantees and commitments are not met, financial instruments are purchased, which broadly match the nature and terms of the expected policy benefits payable. The composition of the investment portfolio is governed by the nature of the insurance or savings liabilities, the expected rate of return applicable on each class of asset and the capital available to meet the price fluctuations of each asset class, relative to the liabilities they support. Assets which are not backing liabilities are hedged in line with the Group\u2019s overall tolerance for interest rate risk. The asset-liability matching and hedging do not eliminate all interest rate risk and the group retains some residual risk. 7 Asset risk continued Credit risk Principal risks Business segment Controls to mitigate risks Bond default risk A significant portfolio of corporate and infrastructure bonds and commercial loans are held to back the liabilities arising from writing insurance and annuities business. Whilst the portfolio is diversified, the asset class is inherently exposed to the risk of issuer default, with the possibility of financial loss. LGC is also exposed to the risk of issuer default through its investment in European private credit manager, Pemberton. Retail, LGRI and LGC Portfolio level and specific issuer limits are set by financial strength rating, sector and geographic region to limit exposure to a default event. Exposures are regularly reviewed to take account of changes in market conditions, sector performance and the re-assessment of financial strength by rating agencies and the group\u2019s own internal analysis. Exposures are monitored relative to limits. If appropriate, actions are taken to trade out investments at risk of default \u2013 in some instances financial instruments may also be used to mitigate the impact of rating downgrades and defaults. Reinsurance counterparty risk Exposure to insurance risk is mitigated by ceding part of the risks assumed to the reinsurance market. Default of a reinsurer would require the business to be re-brokered potentially on less advantageous terms, or for the risks to be borne directly resulting in possible financial loss. The group is required to carry an element of associated credit risk capital on its balance sheet should the business not be re-brokered on the same terms. Retail and LGRI When selecting new reinsurance partners for its protection business, the group considers only companies which have a minimum credit rating equivalent to A- from Standard & Poor\u2019s. For each reinsurer, exposure limits are determined based on credit ratings and projected exposure over the term of the treaty. Actual exposures are regularly monitored relative to these limits. Similarly, for longevity and credit risk syndication transactions, the group targets the use of strongly rated counterparties and seeks to ensure that positions are fully collateralised. The adequacy and quality of collateral is subject to ongoing monitoring. Property lending counterparty risk As part of our asset diversification strategy, we hold commercial property loans and sale and leaseback investments. We are inherently exposed to the risk of default by a borrower or tenant. Retail and LGRI Each property lending and sale and leaseback investment transaction is subject to a due diligence process to assess the credit risks implicit in the transaction. In the case of commercial property lending we protect our interests by taking security over the underlying property associated with each investment transaction. Banking counterparty risk The group is exposed to potential financial loss should banks or the issuers of financial instruments default on their obligations to us. We are also exposed to counterparty risks in respect of the providers of settlement and custody services. Retail, LGRI, LGC and Group The group controls its exposures to banking counterparties and the issuers of financial instruments using a framework of counterparty limits. These limits take account of the relative financial strength of the counterparty as well as other bank counterparty exposures that the group may have. Limits are subject to regular review with actual exposures monitored against limits. The group has defined criteria for the selection of custody and settlement services. The financial strength of providers is regularly reviewed. Liquidity risk Principal risks Business segment Controls to mitigate risks Contingent event risk Events that result in liquidity risk include a pandemic that could lead to significantly higher levels of claims than would normally be expected, or extreme events impacting the timing of cash flows or the ability to realise investments at a given value within a specified timeframe. Retail and Group The group seeks to ensure that it meets its obligations as they fall due and avoids incurring material losses on forced asset sales in order to meet those obligations. A limited level of contingent liquidity risk is, however, an accepted element of writing insurance contracts. It is furthermore a consequence of the markets in which the group operates and the execution of investment management strategies. However, the group\u2019s insurance businesses seek to maintain sufficient liquid assets and standby facilities to meet a prudent estimate of the cash outflows that may arise from contingent events. The level of required liquidity is identified using techniques including stress tests for shock events and the profile of actual liquid assets is regularly compared to the required liability profile. The group\u2019s treasury function provides formal facilities to other areas of the group to cover contingent liquidity requirements arising from more extreme events and where investment assets may not be readily realisable. Collateral liquidity risk Within the annuity businesses, the use of financial instruments to hedge default, interest rate, currency and inflation risks can require the posting of collateral with counterparties at short notice. Retail and LGRI Liquidity requirements to meet potential collateral calls under stressed conditions are actively managed and an appropriate pool of eligible assets is maintained with counterparties as specified in the associated agreements. As at 31 December 2022, LGRI and Retail held eligible collateral worth more than five times the total amount of outstanding collateral (using the most representative definition of collateral contained within the group\u2019s different collateral agreements). Investment liquidity risk Direct lending, sale and leaseback investments and lifetime mortgage business are inherently illiquid forms of investment, with limited secondary markets to realise the value of assets outside agreed redemption terms. Alternative equity investments are also inherently illiquid forms of investment, with limited secondary markets to realise the value of assets. Retail, LGRI and LGC Given the illiquid nature of the annuity and other liabilities the group is able and willing to take advantage of the premium offered by illiquid assets. The group, however, sets limits on the overall exposure to illiquid investments taking account of the nature and type of liabilities that the assets are held to meet. As at 31 December 2022, the group had \u00a34,834m (2021: \u00a33,596m) of cash and cash equivalents in shareholder funds and a \u00a31.5bn (2021: \u00a31.0bn) syndicated committed revolving credit facility in place, provided by a number of its key relationship banks, maturing in August 2027. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-608": { "value": "Market risks Principal risks Business segment Controls to mitigate risks Investment performance risk The group is exposed to the risk that the income from, and value of, assets held to back insurance liabilities and capital requirements do not perform in line with investment and product pricing assumptions leading to a potential financial loss. Retail, LGRI and LGC Models are used to assess the impact of a range of future return scenarios on investment values and associated liabilities in order to determine optimum portfolios of invested assets. For annuities, which are sensitive to interest rate and inflation risk, analysis of the liabilities is undertaken to create a portfolio of securities, the value of which changes in line with the value of liabilities when interest rates change. For unit linked contracts, there is a risk of volatility in asset management fee income due to the impact of interest rate and market price movements on the fair value of the assets held in the linked funds, on which investment management fees are based. There is also the risk of expense over-runs should the market depress the level of charges which could be imposed. Retail and LGIM The risk is managed through maintaining a diversified range of funds in which customers may invest. The performance of linked investment funds relative to their investment objectives is subject to regular monitoring. Periodic assessment is also made of the long-term profitability to the group of these funds. For some contracts the group has discretion over the level of management charges levied. Property risk Lifetime mortgages include a no-negative equity guarantee which transfers a potential loss exposure to the group as a result of low house price inflation and an exposure to specific properties which may experience lower house price inflation for whatever reason. Retail and LGRI To mitigate the risk, maximum loan to value ratios are set for all lending with further underwriting criteria setting out acceptable properties for lending purposes. Policy terms also require properties to be fully insured and maintained, including the right of inspection. The diversification of lending by property type and geographic region seeks to control exposures to specific aspects in the property market. LGC businesses build homes across the residential market, invest in large commercial and residential development projects and manage several developed real estate assets. The group\u2019s revenue streams are exposed to residential sales achieved, as well as the volume of transactions, both of which may be affected by the performance of the housing market. Revenue streams may also be impacted by significant increases in the cost of raw materials or disruption to supply chains. Independent valuations of real estate assets, either in development or developed, also depend on an assessment of the wider real estate market. LGC Diversification by geographic region and property type avoids concentration of exposures to specific areas of the property market. Sites are developed in a number of phases to spread the risk to local markets over several years and where possible we seek to co-invest with local experts to manage assets. The purchasing of new land for development requires approval from LGC\u2019s Investment Committee and the Group Capital Committee. Where appropriate, key methods are adopted to further manage the risk, such as fixed price construction contracts, forward sales and pre-letting. These businesses can also benefit from flexible funding arrangements available from the group. Independent valuations of real estate assets, either in development or developed, also depend on an assessment of the wider real estate market. Retail and LGRI Diversification by geographic region and property type avoids concentration of exposures to specific areas of the property market. Currency risk To diversify credit risk within the annuities business corporate bond portfolio, investments are held in corporate bonds denominated in non-sterling currencies. LGC also invest in overseas assets. Fluctuations in the value of, or income from, these assets relative to liabilities denominated in sterling could result in unforeseen foreign exchange losses. Retail, LGRI and LGC To mitigate the risk of loss from currency fluctuations, currency swaps and forwards are used to hedge exposures to corporate bonds and equities denominated in currencies other than sterling. Hedging arrangements are placed with strongly rated counterparties with collateral requirements being subject to regular review and reconciliation with the counterparties. The hedges do not eliminate all currency risk and the group retains some residual risk. The consolidated international subsidiaries and financial instruments of subsidiaries are translated into sterling in the consolidated accounts. Changes in the sterling value can impact consolidated equity but may be mitigated by associated hedging transactions. Group To mitigate the risk of loss from currency translation the company continuously monitors its exposure and executes appropriate hedging transactions when necessary. Hedging arrangements are placed with strongly rated counterparties with collateral requirements being subject to regular review and reconciliation with the counterparties. Inflation risk Inflation risk is the potential of realising a loss because of relative or absolute changes in inflation rates. Annuity contracts may provide for future benefits to be paid taking account of changes in the level of inflation. Annuity contracts in payment may include an annual adjustment for movements in price indices. Retail and LGR The investment strategy for the annuities business takes explicit account of the effect of movements in price indices on contracted liabilities. Significant exposures that may adversely impact profitability are hedged using inflation swaps. Annuity contracts also typically provide for a cap and floor on the annual increase in inflation linked benefit payments. The hedges do not eliminate all inflation risk and the group retains some residual risk. Interest rate risk Interest rate risk is the risk that the group is exposed to lower returns or loss as a direct or indirect result of fluctuations in the value of, or income from, specific assets and liabilities arising from changes in underlying interest rates. Retail, LGRI, LGC and Group To mitigate the risk that guarantees and commitments are not met, financial instruments are purchased, which broadly match the nature and terms of the expected policy benefits payable. The composition of the investment portfolio is governed by the nature of the insurance or savings liabilities, the expected rate of return applicable on each class of asset and the capital available to meet the price fluctuations of each asset class, relative to the liabilities they support. Assets which are not backing liabilities are hedged in line with the Group\u2019s overall tolerance for interest rate risk. The asset-liability matching and hedging do not eliminate all interest rate risk and the group retains some residual risk. 15 Market risk (i) Investment performance risk (a) Equity securities The group controls its exposure to geographic price risks by using internal country risk exposure limits. These exposure limits are based on macroeconomic data and key qualitative indicators. The latter take into account economic, social and political environments. The table below indicates the group\u2019s exposure to different equity markets around the world. Unit linked equity investments are excluded from the table as the risk is retained by the policyholder. 2022 2021 Exposure to worldwide equity markets \u00a3m \u00a3m United Kingdom 171 307 North America 176 228 Europe 375 185 Japan 18 17 Asia Pacific 99 36 Other 46 57 Listed equities 885 830 Unlisted equities 1 765 300 Holdings in unit trusts2 1,421 2,055 Total equities 3,071 3,185 1. Unlisted equities are split between \u00a3532m (2021: \u00a3227m) United Kingdom, \u00a3211m (2021: \u00a367m) rest of Europe and \u00a322m (2021: \u00a36m) North America. 2. Limited Partnerships are included within Holdings in unit trusts. (b) Debt securities The group controls its exposure to geographic price risks by using internal country credit ratings. These ratings are based on macroeconomic data and key qualitative indicators. The latter take into account economic, social and political environments. The table below indicates the group\u2019s exposure to different debt security markets around the world. Unit linked debt securities are excluded from the table as the risk is retained by the policyholder. Total Total 2022 2021 Total debt securities and accrued interest \u00a3m \u00a3m United Kingdom 31,291 43,554 USA 26,725 26,859 Netherlands 1,864 2,763 France 921 1,899 Germany 238 640 GIIPS: \u2013 Ireland 1,648 1,475 \u2013 Italy 30 36 \u2013 Spain 202 278 Belgium 298 394 Rest of Europe 1,888 2,551 Brazil 2 59 Rest of World 5,504 6,228 Collateralised debt obligations1 52 67 Total 70,663 86,803 1. All CDOs of \u00a352m (2021: \u00a367m) are domiciled in the Rest of World. 15 Market risk continued (i) Investment performance risk continued (c) Additional disclosures on shareholder securities exposure 2022 2022 2021 2021 \u00a3m % \u00a3m % Sovereigns, supras and sub-sovereigns 8,192 12 14,027 16 Banks: \u2013 Tier 1 1 \u2013 \u2013 \u2013 \u2013 Tier 2 and other subordinated 152 \u2013 95 \u2013 \u2013 Senior 4,479 6 6,690 8 \u2013 Covered 114 \u2013 138 \u2013 Financial services: \u2013 Tier 2 and other subordinated 209 \u2013 251 \u2013 \u2013 Senior 1,437 2 1,210 1 Insurance: \u2013 Tier 2 and other subordinated 267 \u2013 347 \u2013 \u2013 Senior 941 1 1,195 1 Consumer services and goods: \u2013 Cyclical 3,185 5 3,398 4 \u2013 Non-cyclical 7,037 10 8,272 10 \u2013 Healthcare 2,285 3 2,421 3 Infrastructure: \u2013 Social 5,521 8 6,975 8 \u2013 Economic 4,904 7 5,959 7 Technology and telecoms 4,405 6 5,062 6 Industrials 1,462 2 1,307 2 Utilities 10,759 15 11,876 14 Energy 1,165 2 1,241 1 Commodities 999 1 1,262 1 Oil and gas 1,709 3 2,175 3 Real estate 3,831 6 3,527 4 Structured finance ABS/RMBS/CMBS/Other 2,713 4 2,451 3 Lifetime mortgage loans 4,844 7 6,857 8 Collateralised debt obligations 52 \u2013 67 \u2013 Total 70,663 100 86,803 100 2022 2021 Analysis of sovereigns, supras and sub-sovereigns \u00a3m \u00a3m Market value by region United Kingdom 5,209 9,829 USA 1,754 1,892 Netherlands 31 23 France 106 485 Germany 95 380 Ireland 187 302 Belgium 6 \u2013 Rest of Europe 189 54 Rest of World 615 1,062 Total 8,192 14,027 (ii) Currency risk The group has minimal exposure to currency risk from financial instruments held by business units in currencies other than their functional currencies, nearly all such holdings are either backing insurance contracts in the same currency or are hedged back to GBP. The group operates internationally and as a result is exposed to foreign currency exchange risk arising from fluctuations in exchange rates of various currencies. The largest United States dollar currency exposures relate to the group\u2019s US business, Legal & General America. The majority of currency exposures relating to euros are held by Legal & General Investment Management (Europe) Limited, a subsidiary of Legal & General Investment Management (Holdings) Limited. The group does not hedge foreign currency revenues as these are substantially retained locally to support the growth of the group\u2019s business and meet local regulatory and market requirements. Businesses aim to maintain sufficient assets in local currency to meet local currency liabilities, however movements may impact the value of the group\u2019s consolidated shareholders\u2019 equity which is expressed in sterling. This aspect of foreign exchange risk is monitored and managed centrally, against pre-determined limits. These exposures are managed by aligning the deployment of regulatory capital by currency with the group\u2019s regulatory capital requirements by currency. Currency borrowings and derivatives may be used to manage exposures within the limits that have been set. As at 31 December 2022, the group held net liabilities of \u00a34.3bn (2021: net assets of \u00a30.5bn) in currencies, mainly United States dollar and euro, other than the functional currency of the relevant business unit. The exchange risks inherent in these exposures may be mitigated through the use of derivatives, mainly forward currency contracts. Consistent with the group\u2019s accounting policies, the profits of overseas business units (reported as functional currencies) are translated at average exchange rates and the net assets (reported as functional currencies) at the closing rate for the reporting period. A 10% increase (weakening of foreign currencies) or decrease (strengthening of foreign currencies) in these rates would increase or reduce the profit for the year and net assets as follows: A 10% increase in A 10% decrease in USD:GBP exchange rate USD:GBP exchange rate 2022 2021 2022 2021 \u00a3m \u00a3m \u00a3m \u00a3m Profit for the year 1 (25) (2) 30 3 Net assets attributable to USD exposures1 358 (19) (437) 23 A 10% increase in A 10% decrease in EUR:GBP exchange rate EUR:GBP exchange rate 2022 2021 2022 2021 \u00a3m \u00a3m \u00a3m \u00a3m Profit for the year 1 \u2013 (1) \u2013 1 Net assets attributable to EUR exposures1 37 (39) (45) 47 1. Profit for the year impacts relate only to overseas business units where the functional currency is not sterling. Net asset impacts include both functional currency and non-functional currency exposures. ", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-609": { "value": "Credit risk Principal risks Business segment Controls to mitigate risks Bond default risk A significant portfolio of corporate and infrastructure bonds and commercial loans are held to back the liabilities arising from writing insurance and annuities business. Whilst the portfolio is diversified, the asset class is inherently exposed to the risk of issuer default, with the possibility of financial loss. LGC is also exposed to the risk of issuer default through its investment in European private credit manager, Pemberton. Retail, LGRI and LGC Portfolio level and specific issuer limits are set by financial strength rating, sector and geographic region to limit exposure to a default event. Exposures are regularly reviewed to take account of changes in market conditions, sector performance and the re-assessment of financial strength by rating agencies and the group\u2019s own internal analysis. Exposures are monitored relative to limits. If appropriate, actions are taken to trade out investments at risk of default \u2013 in some instances financial instruments may also be used to mitigate the impact of rating downgrades and defaults. Reinsurance counterparty risk Exposure to insurance risk is mitigated by ceding part of the risks assumed to the reinsurance market. Default of a reinsurer would require the business to be re-brokered potentially on less advantageous terms, or for the risks to be borne directly resulting in possible financial loss. The group is required to carry an element of associated credit risk capital on its balance sheet should the business not be re-brokered on the same terms. Retail and LGRI When selecting new reinsurance partners for its protection business, the group considers only companies which have a minimum credit rating equivalent to A- from Standard & Poor\u2019s. For each reinsurer, exposure limits are determined based on credit ratings and projected exposure over the term of the treaty. Actual exposures are regularly monitored relative to these limits. Similarly, for longevity and credit risk syndication transactions, the group targets the use of strongly rated counterparties and seeks to ensure that positions are fully collateralised. The adequacy and quality of collateral is subject to ongoing monitoring. Property lending counterparty risk As part of our asset diversification strategy, we hold commercial property loans and sale and leaseback investments. We are inherently exposed to the risk of default by a borrower or tenant. Retail and LGRI Each property lending and sale and leaseback investment transaction is subject to a due diligence process to assess the credit risks implicit in the transaction. In the case of commercial property lending we protect our interests by taking security over the underlying property associated with each investment transaction. Banking counterparty risk The group is exposed to potential financial loss should banks or the issuers of financial instruments default on their obligations to us. We are also exposed to counterparty risks in respect of the providers of settlement and custody services. Retail, LGRI, LGC and Group The group controls its exposures to banking counterparties and the issuers of financial instruments using a framework of counterparty limits. These limits take account of the relative financial strength of the counterparty as well as other bank counterparty exposures that the group may have. Limits are subject to regular review with actual exposures monitored against limits. The group has defined criteria for the selection of custody and settlement services. The financial strength of providers is regularly reviewed. 16 Credit risk The credit profile of the group\u2019s assets exposed to credit risk is shown below. The credit rating bands are provided by independent rating agencies. For unrated assets, the group maintains internal ratings which are used to manage exposure to these counterparties. Unit linked assets have not been included as shareholders are not directly exposed to the associated credit risk. Additionally, assets such as equity securities, deferred acquisition costs and tax have no exposure to the associated credit risk and therefore have also been excluded. The carrying amount of the financial assets recorded in the financial statements represents the maximum exposure to credit risk. Shareholder Internally BB and rated and AAA AA A BBB below other 1 Total As at 31 December 2022 Notes \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Government securities 1,445 3,691 166 105 8 90 5,505 Other fixed rate securities 1,957 4,757 13,662 15,415 446 13,717 49,954 Variable rate securities 306 2,056 1,864 2,701 70 2,729 9,726 Lifetime mortgages \u2013 \u2013 \u2013 \u2013 \u2013 4,844 4,844 Accrued interest 33 73 183 255 5 85 634 Total debt securities 1 10(i) 3,741 10,577 15,875 18,476 529 21,465 70,663 Loans 10(ii) \u2013 303 318 47 9 423 1,100 Derivative assets 12 1 29 38,829 2,938 \u2013 181 41,978 Cash and cash equivalents 14 412 2,067 1,496 77 \u2013 782 4,834 Reinsurers\u2019 share of contract liabilities \u2013 4,138 1,596 999 \u2013 222 6,955 Other assets 145 300 672 68 1 6,288 7,474 Total 4,299 17,414 58,786 22,605 539 29,361 133,004 1. Of the total debt securities and accrued interest that have been internally rated and unrated, \u00a33,549m is rated AAA, \u00a32,443m AA, \u00a38,029m A, \u00a36,964m BBB, \u00a3376m BB or below and \u00a3104m as other. Internally BB and rated and AAA AA A BBB below other 1 Total As at 31 December 2021 Notes \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Government securities 1,722 7,38 9 144 348 9 474 10,086 Other fixed rate securities 1,619 6,146 18,391 17,723 865 14,062 58,806 Variable rate securities 143 1,953 2,539 2,413 64 3,388 10,500 Lifetime mortgages \u2013 \u2013 \u2013 \u2013 \u2013 6,857 6,857 Accrued interest 22 56 166 231 12 67 554 Total debt securities1 10(i) 3,506 15,544 21,240 20,715 950 24,848 86,803 Loans 10(ii) 61 1,309 779 153 \u2013 30 2,332 Derivative assets 12 \u2013 \u2013 11,176 1,925 \u2013 102 13,203 Cash and cash equivalents 14 694 648 1,924 80 \u2013 250 3,596 Reinsurers\u2019 share of contract liabilities \u2013 5,656 1,127 1 \u2013 396 7,180 Other assets 57 35 592 32 7 5,951 6,674 Total 4,318 23,192 36,838 22,906 957 31,577 119,788 1. Of the total debt securities and accrued interest that have been internally rated and unrated, \u00a34,617m is rated AAA, \u00a33,649m AA, \u00a38,675m A, \u00a37,465m BBB, \u00a3417m BB or below and \u00a325m as other. Impairment The group reviews the carrying value of its financial assets (other than those held at FVTPL) at each balance sheet date. If the carrying value of a financial asset is impaired, the carrying value is reduced through a charge to the Consolidated Income Statement. There must be objective evidence of impairment as a result of one or more events which have occurred after the initial recognition of the asset. Impairment is only recognised if the loss event has an impact on the estimated future cash flows of assets held at amortised cost or on the fair value of assets classified as available for sale. The table below includes assets at FVTPL and held at amortised cost, and provides information regarding the carrying value of financial assets which have been impaired, as well as the ageing analysis of financial assets which are past due but not impaired. Unit linked assets have not been included as shareholders are not exposed to the risks from unit linked policies. Ageing analysis Past due but not impaired Neither past due nor 0-3 3-6 6 months- Over Carrying impaired months months 1 year 1 year Impaired value As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Shareholder 131,971 761 226 22 24 \u2013 133,004 Past due but not impaired Neither past due nor 0-3 3-6 6 months- Over Carrying impaired months months 1 year 1 year Impaired value As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Shareholder 119,600 132 23 16 17 \u2013 119,788 Offsetting Financial assets and liabilities are offset in the Consolidated Balance Sheet when the group has a legally enforceable right to offset and has the intention to settle the asset and liability on a net basis, or to realise the asset and liability simultaneously. The group has not entered into any financial transactions resulting in financial assets and liabilities being offset in the Consolidated Balance Sheet. The table below shows the financial assets and liabilities that are subject to master netting agreements in shareholder funds. Unit linked assets and liabilities have not been included as shareholders are not exposed to the risks on these policies. Amounts subject to enforceable netting arrangements Amounts under master netting arrangements but not offset Gross and net amounts reported in the Consolidated Related Securities Balance financial Cash collateral Net Sheet instruments1 collateral2 pledged2 amount As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Derivative assets 41,978 (40,999) (924) (55) \u2013 Reverse repurchase agreements 1,072 \u2013 \u2013 (1,072) \u2013 Total 43,050 (40,999) (924) (1,127) \u2013 Derivative liabilities (46,105) 40,999 2,212 2,894 \u2013 Repurchase agreements (837) \u2013 \u2013 837 \u2013 Total (46,942) 40,999 2,212 3,731 \u2013 Amounts subject to enforceable netting arrangements Amounts under master netting arrangements but not offset Gross and net amounts reported in the Consolidated Related Securities Balance financial Cash collateral Net Sheet instruments1 collateral2 pledged2 amount As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Derivative assets 13,203 (11,720) (789) (694) \u2013 Reverse repurchase agreements 2,240 \u2013 \u2013 (2,240) \u2013 Total 15,443 (11,720) (789) (2,934) \u2013 Derivative liabilities (14,097) 11,720 1,895 482 \u2013 Repurchase agreements (1,116) \u2013 \u2013 1,116 \u2013 Total (15,213) 11,720 1,895 1,598 \u2013 1. Related financial instruments represent outstanding amounts with the same counterparty which, under agreements such as the ISDA Master Agreement, could be offset and settled net following certain predetermined events. 2. Cash and securities held may exceed target levels due to the complexities of operational collateral management, timing and the agreements in place with individual counterparties. In the tables above, the amounts of assets or liabilities presented in the Consolidated Balance Sheet are offset first by financial instruments that have the right of offset under master netting or similar arrangements with any remaining amount reduced by cash and securities collateral. The actual amount of collateral may be greater than the amounts presented in the tables above. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-610": { "value": "Liquidity risk Principal risks Business segment Controls to mitigate risks Contingent event risk Events that result in liquidity risk include a pandemic that could lead to significantly higher levels of claims than would normally be expected, or extreme events impacting the timing of cash flows or the ability to realise investments at a given value within a specified timeframe. Retail and Group The group seeks to ensure that it meets its obligations as they fall due and avoids incurring material losses on forced asset sales in order to meet those obligations. A limited level of contingent liquidity risk is, however, an accepted element of writing insurance contracts. It is furthermore a consequence of the markets in which the group operates and the execution of investment management strategies. However, the group\u2019s insurance businesses seek to maintain sufficient liquid assets and standby facilities to meet a prudent estimate of the cash outflows that may arise from contingent events. The level of required liquidity is identified using techniques including stress tests for shock events and the profile of actual liquid assets is regularly compared to the required liability profile. The group\u2019s treasury function provides formal facilities to other areas of the group to cover contingent liquidity requirements arising from more extreme events and where investment assets may not be readily realisable. Collateral liquidity risk Within the annuity businesses, the use of financial instruments to hedge default, interest rate, currency and inflation risks can require the posting of collateral with counterparties at short notice. Retail and LGRI Liquidity requirements to meet potential collateral calls under stressed conditions are actively managed and an appropriate pool of eligible assets is maintained with counterparties as specified in the associated agreements. As at 31 December 2022, LGRI and Retail held eligible collateral worth more than five times the total amount of outstanding collateral (using the most representative definition of collateral contained within the group\u2019s different collateral agreements). Investment liquidity risk Direct lending, sale and leaseback investments and lifetime mortgage business are inherently illiquid forms of investment, with limited secondary markets to realise the value of assets outside agreed redemption terms. Alternative equity investments are also inherently illiquid forms of investment, with limited secondary markets to realise the value of assets. Retail, LGRI and LGC Given the illiquid nature of the annuity and other liabilities the group is able and willing to take advantage of the premium offered by illiquid assets. The group, however, sets limits on the overall exposure to illiquid investments taking account of the nature and type of liabilities that the assets are held to meet. As at 31 December 2022, the group had \u00a34,834m (2021: \u00a33,596m) of cash and cash equivalents in shareholder funds and a \u00a31.5bn (2021: \u00a31.0bn) syndicated committed revolving credit facility in place, provided by a number of its key relationship banks, maturing in August 2027. ", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-548": { "value": "8 Assets analysis The group has categorised its assets and liabilities in the following disclosure in accordance with the level of shareholder exposure to market and credit risks. Various reinsurance and hedging arrangements are in place as mechanisms to mitigate the risks. The two categorisations presented are: Unit linked For unit linked contracts, there is a direct link between the investments and the obligations. Unit linked business is written in both Legal and General Assurance Society Limited and Legal and General Assurance (Pensions Management) Limited. The financial risk on these contracts is borne by the policyholders. The group is therefore not directly exposed to any market risk, currency risk or credit risk for these contracts. As a result, risk disclosures have not been presented for unit linked assets and liabilities. Shareholder All non-unit linked assets are classified as shareholder assets. Shareholders of the group are directly exposed to market and credit risk on these assets, including those backing the non-unit linked business. The table below presents an analysis of the balance sheet by category. The quantitative risk disclosures in Notes 15 and 16 have been provided using this categorisation. Unit Shareholder linked Total As at 31 December 2022 \u00a3m \u00a3m \u00a3m Assets Goodwill and Other intangible assets 512 \u2013 512 Investment in associates and joint ventures accounted for using the equity method 554 \u2013 554 Property, plant and equipment 252 74 326 Investments1 127, 290 363,341 490,631 Reinsurers\u2019 share of contract liabilities 6,955 \u2013 6,955 Other assets 7,683 6,615 14,298 Total assets 143,246 370,030 513,276 Liabilities Core borrowings 4,432 (94) 4,338 Operational borrowings 963 256 1,219 Non-participating contract liabilities 71,752 285,415 357,167 Other liabilities 53,989 84,424 138,413 Total liabilities 131,136 370,001 501,137 Unit Shareholder linked Total As at 31 December 2021 \u00a3m \u00a3m \u00a3m Assets Goodwill and Other intangible assets 433 \u2013 433 Investment in associates and joint ventures accounted for using the equity method 375 \u2013 375 Property, plant and equipment 242 74 316 Investments1 114,829 450,182 565,011 Reinsurers\u2019 share of contract liabilities 7,180 \u2013 7,180 Other assets 6,701 2,622 9,323 Total assets 129,760 452,878 582,638 Liabilities Core borrowings 4,309 (53) 4,256 Operational borrowings 924 8 932 Non-participating contract liabilities 91,698 371,081 462,779 Other liabilities 21,916 81,812 103,728 Total liabilities 118,847 452,848 571,695 1. Investments includes financial investments, investment property and cash and cash equivalents. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfAssetsAnalysis", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-549": { "value": "Other intangible assets mainly consist of capitalised software costs and intangible assets acquired as part of a business combination (customer relationships and brand). Where software costs are separately identifiable and measurable, they are capitalised at cost and amortised over their expected useful life on a straight line basis. Costs incurred to internally develop software are only capitalised if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the group intends to and has sufficient resources to complete such development and to use or sell the asset. Otherwise, such costs are recognised in profit or loss as incurred. Intangible assets acquired via business combinations are recognised at fair value and are subsequently amortised on a straight line basis over their estimated useful life. The brand balance acquired by the group is deemed to have an indefinite useful life and is therefore not amortised. The estimated amortisation periods for intangible assets with finite useful lives are as follows: \u2022 IT development and software 3-10 years \u2022 Customer relationship 3 years Amortisation methods, useful lives and any expected residual values are reviewed at each reporting date and adjusted if appropriate. The amortisation charge for the year is recognised in the Consolidated Income Statement in Other expenses (see Note 3). For impairment testing, other intangible assets are tested either individually or at the cash-generating unit level. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets with finite useful lives are tested when there are indications of impairment. The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and its value in use. Any impairments are recognised in Other expenses (see Note 3) . ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-611": { "value": "Other intangible assets mainly consist of capitalised software costs and intangible assets acquired as part of a business combination (customer relationships and brand). Where software costs are separately identifiable and measurable, they are capitalised at cost and amortised over their expected useful life on a straight line basis. Costs incurred to internally develop software are only capitalised if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the group intends to and has sufficient resources to complete such development and to use or sell the asset. Otherwise, such costs are recognised in profit or loss as incurred. Intangible assets acquired via business combinations are recognised at fair value and are subsequently amortised on a straight line basis over their estimated useful life. The brand balance acquired by the group is deemed to have an indefinite useful life and is therefore not amortised. The estimated amortisation periods for intangible assets with finite useful lives are as follows: \u2022 IT development and software 3-10 years \u2022 Customer relationship 3 years Amortisation methods, useful lives and any expected residual values are reviewed at each reporting date and adjusted if appropriate. The amortisation charge for the year is recognised in the Consolidated Income Statement in Other expenses (see Note 3). For impairment testing, other intangible assets are tested either individually or at the cash-generating unit level. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets with finite useful lives are tested when there are indications of impairment. The recoverable amount is the higher of an asset\u2019s fair value less costs to sell and its value in use. Any impairments are recognised in Other expenses (see Note 3) . ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-550": { "value": "Capitalised software costs 1 Other 2 Total 2022 2022 2022 \u00a3m \u00a3m \u00a3m Cost As at 1 January 450 34 484 Additions 120 1 121 Disposals (34) \u2013 (34) Increase due to currency translation 5 \u2013 5 Other movements 3 (21) \u2013 (21) As at 31 December 520 35 555 Accumulated amortisation and impairment As at 1 January (115) (4) (119) Amortisation for the year (45) (1) (46) Impairment \u2013 \u2013 \u2013 Disposals 28 \u2013 28 Other movements 3 23 \u2013 23 As at 31 December (109) (5) (114) Total net book value as at 31 December 411 30 441 To be amortised within 12 months 43 To be amortised after 12 months 398 1. Total capitalised software costs include \u00a3204m of work in progress assets that are not yet available for use as at 31 December 2022. 2. Other intangible assets include brand (\u00a324m) and product design costs (\u00a36m) as at 31 December 2022. 3. Other movements primarily reflect the removal of fully amortised assets that are no longer in use. 9 Other intangible assets continued Capitalised software costs 1 Other 2 Total 2021 2021 2021 \u00a3m \u00a3m \u00a3m Cost As at 1 January 372 33 405 Additions 120 1 121 Increase due to currency translation 1 \u2013 1 Other movements 3 (43) \u2013 (43) As at 31 December 450 34 484 Accumulated amortisation and impairment As at 1 January (73) (3) (76) Amortisation for the year (39) (1) (40) Impairment (49) \u2013 (49) Other movements 3 46 \u2013 46 As at 31 December (115) (4) (119) Total net book value as at 31 December 335 30 365 To be amortised within 12 months 60 To be amortised after 12 months 305 1. Total capitalised software costs include \u00a3152m of work in progress assets that were not yet available for use as at 31 December 2021. 2. Other intangible assets include brand (\u00a324m) and product design costs (\u00a36m) as at 31 December 2021. 3. Other movements primarily reflect the removal of fully amortised assets that were no longer in use. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-612": { "value": "Capitalised software costs 1 Other 2 Total 2022 2022 2022 \u00a3m \u00a3m \u00a3m Cost As at 1 January 450 34 484 Additions 120 1 121 Disposals (34) \u2013 (34) Increase due to currency translation 5 \u2013 5 Other movements 3 (21) \u2013 (21) As at 31 December 520 35 555 Accumulated amortisation and impairment As at 1 January (115) (4) (119) Amortisation for the year (45) (1) (46) Impairment \u2013 \u2013 \u2013 Disposals 28 \u2013 28 Other movements 3 23 \u2013 23 As at 31 December (109) (5) (114) Total net book value as at 31 December 411 30 441 To be amortised within 12 months 43 To be amortised after 12 months 398 1. Total capitalised software costs include \u00a3204m of work in progress assets that are not yet available for use as at 31 December 2022. 2. Other intangible assets include brand (\u00a324m) and product design costs (\u00a36m) as at 31 December 2022. 3. Other movements primarily reflect the removal of fully amortised assets that are no longer in use. 9 Other intangible assets continued Capitalised software costs 1 Other 2 Total 2021 2021 2021 \u00a3m \u00a3m \u00a3m Cost As at 1 January 372 33 405 Additions 120 1 121 Increase due to currency translation 1 \u2013 1 Other movements 3 (43) \u2013 (43) As at 31 December 450 34 484 Accumulated amortisation and impairment As at 1 January (73) (3) (76) Amortisation for the year (39) (1) (40) Impairment (49) \u2013 (49) Other movements 3 46 \u2013 46 As at 31 December (115) (4) (119) Total net book value as at 31 December 335 30 365 To be amortised within 12 months 60 To be amortised after 12 months 305 1. Total capitalised software costs include \u00a3152m of work in progress assets that were not yet available for use as at 31 December 2021. 2. Other intangible assets include brand (\u00a324m) and product design costs (\u00a36m) as at 31 December 2021. 3. Other movements primarily reflect the removal of fully amortised assets that were no longer in use. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-613": { "value": "The group holds financial investments and investment property to back insurance contracts on behalf of policyholders and as group capital. The group classifies its financial investments on initial recognition as held for trading (HFT), designated at fair value through profit or loss (FVTPL), available-for-sale (AFS) or loans and receivables. Initial recognition of financial investments is on the trade date. In general, the group\u2019s policy is to measure investments at FVTPL. Financial investments held by the group are designated as FVTPL as their performance is evaluated on a total return basis, consistent with asset performance reporting to the Group Financial Risk Committee and the group\u2019s investment strategy. Assets designated as FVTPL include debt securities (including lifetime and retirement interest only mortgages), equity instruments which would otherwise have been classified as AFS, and reverse repurchase agreements within loans which would otherwise be designated at amortised cost. Assets backing non-participating policyholder liabilities are designated as FVTPL. The group\u2019s non-participating investment contract liabilities are measured on the basis of current information and are designated as FVTPL. All derivatives other than those designated as hedges are classified as HFT. Financial investments classified as HFT and designated at FVTPL are measured at fair value with gains and losses reflected in the Consolidated Income Statement. Transaction costs are expensed as incurred. Certain other financial investments classified as AFS are measured at fair value with unrealised gains and losses recognised in a separate reserve within equity. Realised gains and losses, impairment losses, dividends, interest and foreign exchange movements on non-equity instruments are recognised in the Consolidated Income Statement. Directly attributable transaction costs are included in the initial measurement of the investment. Financial investments classified as loans are either designated at FVTPL, or initially measured at fair value plus transaction costs, and subsequently measured at amortised cost using the effective interest method. The designated at FVTPL classification currently only applies to reverse repurchase agreements. Financial investments are recognised when the group becomes a party to the contractual provisions of the instrument. Financial investments are derecognised only when the contractual rights to the cash flows from the investment expire, or when the group transfers substantially all the risks and rewards of ownership to another entity. Financial assets, other than those measured at FVTPL, are assessed for impairment at each balance sheet date. They are impaired where there is objective evidence that, as a result of one or more events after initial recognition of the financial asset, the estimated future cash flows have been affected. Investment property is comprised of land and buildings which are held for long-term rental yields and capital growth, as well as right-of-use assets of the same nature. It is carried at fair value, with changes in fair value recognised in the Consolidated Income Statement within investment return. Investment property in the UK is valued at least bi-annually by external chartered surveyors at open market values in accordance with the \u2018Appraisal and Valuation Manual\u2019 of The Royal Institution of Chartered Surveyors or using internal valuations and estimates during the intervening period. Outside the UK, valuations are produced in conjunction with external qualified professional valuers in the countries concerned. In the event of a material change in market conditions between the valuation date and balance sheet date, an internal valuation is performed and adjustments made to reflect any material changes in fair value. Right-of-use investment property assets relate to long-leasehold interests in land held solely for the purposes of the related investment property asset. The group applies the fair value model to these interests as they meet the definition of investment property under IAS 40, \u2018Investment Property\u2019. The group receives and pledges collateral in the form of cash or non-cash assets in respect of various transactions, in order to reduce the credit risk of these transactions. The amount and type of collateral required where the group receives collateral depends on an assessment of the credit risk of the counterparty. Collateral received in the form of cash, where the group has contractual rights to receive the cash flows generated, is recognised as an asset in the Consolidated Balance Sheet with a corresponding liability for its repayment. Non-cash collateral received is not recognised in the Consolidated Balance Sheet unless the counterparty defaults on its obligations under the relevant agreement. Non-cash collateral pledged where the group retains the contractual rights to receive the cash flows generated is not derecognised from the Consolidated Balance Sheet, unless the group defaults on its obligations under the relevant agreement. Cash collateral pledged, where the counterparty has contractual rights to receive the cash flows generated, is derecognised from the Consolidated Balance Sheet and a corresponding receivable is recognised for its return. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-551": { "value": "The group holds financial investments and investment property to back insurance contracts on behalf of policyholders and as group capital. The group classifies its financial investments on initial recognition as held for trading (HFT), designated at fair value through profit or loss (FVTPL), available-for-sale (AFS) or loans and receivables. Initial recognition of financial investments is on the trade date. In general, the group\u2019s policy is to measure investments at FVTPL. Financial investments held by the group are designated as FVTPL as their performance is evaluated on a total return basis, consistent with asset performance reporting to the Group Financial Risk Committee and the group\u2019s investment strategy. Assets designated as FVTPL include debt securities (including lifetime and retirement interest only mortgages), equity instruments which would otherwise have been classified as AFS, and reverse repurchase agreements within loans which would otherwise be designated at amortised cost. Assets backing non-participating policyholder liabilities are designated as FVTPL. The group\u2019s non-participating investment contract liabilities are measured on the basis of current information and are designated as FVTPL. All derivatives other than those designated as hedges are classified as HFT. Financial investments classified as HFT and designated at FVTPL are measured at fair value with gains and losses reflected in the Consolidated Income Statement. Transaction costs are expensed as incurred. Certain other financial investments classified as AFS are measured at fair value with unrealised gains and losses recognised in a separate reserve within equity. Realised gains and losses, impairment losses, dividends, interest and foreign exchange movements on non-equity instruments are recognised in the Consolidated Income Statement. Directly attributable transaction costs are included in the initial measurement of the investment. Financial investments classified as loans are either designated at FVTPL, or initially measured at fair value plus transaction costs, and subsequently measured at amortised cost using the effective interest method. The designated at FVTPL classification currently only applies to reverse repurchase agreements. Financial investments are recognised when the group becomes a party to the contractual provisions of the instrument. Financial investments are derecognised only when the contractual rights to the cash flows from the investment expire, or when the group transfers substantially all the risks and rewards of ownership to another entity. Financial assets, other than those measured at FVTPL, are assessed for impairment at each balance sheet date. They are impaired where there is objective evidence that, as a result of one or more events after initial recognition of the financial asset, the estimated future cash flows have been affected. Investment property is comprised of land and buildings which are held for long-term rental yields and capital growth, as well as right-of-use assets of the same nature. It is carried at fair value, with changes in fair value recognised in the Consolidated Income Statement within investment return. Investment property in the UK is valued at least bi-annually by external chartered surveyors at open market values in accordance with the \u2018Appraisal and Valuation Manual\u2019 of The Royal Institution of Chartered Surveyors or using internal valuations and estimates during the intervening period. Outside the UK, valuations are produced in conjunction with external qualified professional valuers in the countries concerned. In the event of a material change in market conditions between the valuation date and balance sheet date, an internal valuation is performed and adjustments made to reflect any material changes in fair value. Right-of-use investment property assets relate to long-leasehold interests in land held solely for the purposes of the related investment property asset. The group applies the fair value model to these interests as they meet the definition of investment property under IAS 40, \u2018Investment Property\u2019. The group receives and pledges collateral in the form of cash or non-cash assets in respect of various transactions, in order to reduce the credit risk of these transactions. The amount and type of collateral required where the group receives collateral depends on an assessment of the credit risk of the counterparty. Collateral received in the form of cash, where the group has contractual rights to receive the cash flows generated, is recognised as an asset in the Consolidated Balance Sheet with a corresponding liability for its repayment. Non-cash collateral received is not recognised in the Consolidated Balance Sheet unless the counterparty defaults on its obligations under the relevant agreement. Non-cash collateral pledged where the group retains the contractual rights to receive the cash flows generated is not derecognised from the Consolidated Balance Sheet, unless the group defaults on its obligations under the relevant agreement. Cash collateral pledged, where the counterparty has contractual rights to receive the cash flows generated, is derecognised from the Consolidated Balance Sheet and a corresponding receivable is recognised for its return. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-552": { "value": "10 Financial investments and investment property continued Unit Shareholder linked Total 2022 2022 2022 Note \u00a3m \u00a3m \u00a3m Financial investments at fair value classified as: Fair value through profit or loss 72,945 312,003 384,948 Available-for-sale 789 \u2013 789 Held for trading 41,978 3,449 45,427 Loans at fair value 10(ii) 1,072 13,211 14,283 Financial investments at fair value 116,784 328,663 445,447 Loans at amortised cost 10(ii) 28 \u2013 28 Total financial investments 116,812 328,663 445,475 Investment property 5,644 3,728 9,372 Total financial investments and investment property 122,456 332,391 454,847 Expected to be recovered within 12 months 41,466 Expected to be recovered after 12 months 413,381 Unit Shareholder linked Total 2021 2021 2021 Note \u00a3m \u00a3m \u00a3m Financial investments at fair value classified as: Fair value through profit or loss 89,323 419,991 509,314 Available-for-sale 665 \u2013 665 Held for trading 13,203 3,589 16,792 Loans at fair value 10(ii) 2,240 9,271 11,511 Financial investments at fair value 105,431 432,851 538,282 Loans at amortised cost 10(ii) 92 \u2013 92 Total financial investments 105,523 432,851 538,374 Investment property 5,710 4,440 10,150 Total financial investments and investment property 111,233 4 37,291 548,524 Expected to be recovered within 12 months 48,766 Expected to be recovered after 12 months 499,758 Investment risks on unit linked assets are borne by the policyholders. The remaining risks associated with financial investments are outlined in Note 7. Financial investments, cash and cash equivalents include: \u2022 \u00a37,161m (2021: \u00a33,826m) of assets pledged as collateral against net derivative liability counterparty positions. The assets used as collateral are Treasury Gilts, Foreign Government Bonds, AAA and AA Corporate Bonds and Cash (2021: Treasury Gilts, Foreign Government Bonds, AAA and AA Corporate Bonds and Cash) having a residual maturity of over 38 years (2021: over 34 years). \u2022 \u00a35,617m (2021: \u00a37,586m) of assets pledged as collateral in relation to various pension risk transfer deals. The assets used as collateral are Treasury Gilts, AAA to BBB Corporate Bonds and Cash (2021: Treasury Gilts, AAA to BBB Corporate Bonds and Cash) having a residual maturity of over 88 years (2021: over 89 years). \u2022 \u00a3673m (2021: \u00a3900m) of assets pledged in respect of longevity swaps with reinsurance counterparties. The assets used as collateral are Treasury Gilts and AAA to AA Corporate Bonds (2021: Treasury Gilts, AAA to A Corporate Bonds) having a residual maturity of over 45 years (2021: over 47 years). While pledged as collateral, the group is entitled to receive all of the cash flows from the assets above, and there is no obligation to pay or transfer cash flows arising from them to another entity. These assets are neither past due, nor impaired. The carrying value reflects the full exposure of these assets. The group is permitted to sell or repledge collateral as per the International Swap Dealers Association agreements in place, including where there has been no default by the owner of the collateral. As at 31 December 2022, the group had repledged cash collateral with a fair value of \u00a3980m (2021: \u00a3227m) in order to fulfil other collateral requirements in relation to derivatives contracts. The counterparties have an obligation to return the cash collateral to the group. There are no other significant terms and conditions associated with the use of this cash collateral. Financial investments include \u00a331,533m (2021: \u00a346,331m) of assets that have been sold but not derecognised and are subject to repurchase agreements. Risks and rewards of these assets have been retained within the group. The related obligation to repurchase the financial assets is included within Payables and other financial liabilities (Note 24). Financial investments have been allocated between those expected to be settled within 12 months and after 12 months in line with the expected settlement of the backed liabilities. Assets in excess of the insurance and investment contract liabilities have been classified as expected to be settled after 12 months. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-614": { "value": "Unit Shareholder linked Total 2022 2022 2022 Note \u00a3m \u00a3m \u00a3m Financial investments at fair value classified as: Fair value through profit or loss 72,945 312,003 384,948 Available-for-sale 789 \u2013 789 Held for trading 41,978 3,449 45,427 Loans at fair value 10(ii) 1,072 13,211 14,283 Financial investments at fair value 116,784 328,663 445,447 Loans at amortised cost 10(ii) 28 \u2013 28 Total financial investments 116,812 328,663 445,475 Investment property 5,644 3,728 9,372 Total financial investments and investment property 122,456 332,391 454,847 Expected to be recovered within 12 months 41,466 Expected to be recovered after 12 months 413,381 Unit Shareholder linked Total 2021 2021 2021 Note \u00a3m \u00a3m \u00a3m Financial investments at fair value classified as: Fair value through profit or loss 89,323 419,991 509,314 Available-for-sale 665 \u2013 665 Held for trading 13,203 3,589 16,792 Loans at fair value 10(ii) 2,240 9,271 11,511 Financial investments at fair value 105,431 432,851 538,282 Loans at amortised cost 10(ii) 92 \u2013 92 Total financial investments 105,523 432,851 538,374 Investment property 5,710 4,440 10,150 Total financial investments and investment property 111,233 4 37,291 548,524 Expected to be recovered within 12 months 48,766 Expected to be recovered after 12 months 499,758 Investment risks on unit linked assets are borne by the policyholders. The remaining risks associated with financial investments are outlined in Note 7. Financial investments, cash and cash equivalents include: \u2022 \u00a37,161m (2021: \u00a33,826m) of assets pledged as collateral against net derivative liability counterparty positions. The assets used as collateral are Treasury Gilts, Foreign Government Bonds, AAA and AA Corporate Bonds and Cash (2021: Treasury Gilts, Foreign Government Bonds, AAA and AA Corporate Bonds and Cash) having a residual maturity of over 38 years (2021: over 34 years). \u2022 \u00a35,617m (2021: \u00a37,586m) of assets pledged as collateral in relation to various pension risk transfer deals. The assets used as collateral are Treasury Gilts, AAA to BBB Corporate Bonds and Cash (2021: Treasury Gilts, AAA to BBB Corporate Bonds and Cash) having a residual maturity of over 88 years (2021: over 89 years). \u2022 \u00a3673m (2021: \u00a3900m) of assets pledged in respect of longevity swaps with reinsurance counterparties. The assets used as collateral are Treasury Gilts and AAA to AA Corporate Bonds (2021: Treasury Gilts, AAA to A Corporate Bonds) having a residual maturity of over 45 years (2021: over 47 years). While pledged as collateral, the group is entitled to receive all of the cash flows from the assets above, and there is no obligation to pay or transfer cash flows arising from them to another entity. These assets are neither past due, nor impaired. The carrying value reflects the full exposure of these assets. The group is permitted to sell or repledge collateral as per the International Swap Dealers Association agreements in place, including where there has been no default by the owner of the collateral. As at 31 December 2022, the group had repledged cash collateral with a fair value of \u00a3980m (2021: \u00a3227m) in order to fulfil other collateral requirements in relation to derivatives contracts. The counterparties have an obligation to return the cash collateral to the group. There are no other significant terms and conditions associated with the use of this cash collateral. Financial investments include \u00a331,533m (2021: \u00a346,331m) of assets that have been sold but not derecognised and are subject to repurchase agreements. Risks and rewards of these assets have been retained within the group. The related obligation to repurchase the financial assets is included within Payables and other financial liabilities (Note 24). Financial investments have been allocated between those expected to be settled within 12 months and after 12 months in line with the expected settlement of the backed liabilities. Assets in excess of the insurance and investment contract liabilities have been classified as expected to be settled after 12 months. (i) Financial investments at fair value Unit Shareholder linked Total 2022 2022 2022 Notes \u00a3m \u00a3m \u00a3m Equity securities 3,071 164,264 167, 335 Debt securities 70,663 147,739 218,402 Derivative assets 12 41,978 3,449 45,427 Loans at fair value 10(ii) 1,072 13,211 14,283 Total financial investments at fair value 116,784 328,663 445,447 Unit Shareholder linked Total 2021 2021 2021 Notes \u00a3m \u00a3m \u00a3m Equity securities 3,185 209,864 213,049 Debt securities 86,803 210,127 296,930 Derivative assets 12 13,203 3,589 16,792 Loans at fair value 10(ii) 2,240 9,271 11,511 Total financial investments at fair value 105,431 432,851 538,282 Included within unit linked equity securities are \u00a3187m (2021: \u00a3237m) of debt instruments which incorporate an embedded derivative linked to the value of the group\u2019s share price. (ii) Loans Unit Shareholder linked Total 2022 2022 2022 \u00a3m \u00a3m \u00a3m Loans at amortised cost Policy loans 27 \u2013 27 Other loans and receivables 1 \u2013 1 28 \u2013 28 Loans at fair value Reverse repurchase agreements 1,072 13,211 14,283 Total loans 1,100 13,211 14,311 Unit Shareholder linked Total 2021 2021 2021 \u00a3m \u00a3m \u00a3m Loans at amortised cost Policy loans 30 \u2013 30 Other loans and receivables 62 \u2013 62 92 \u2013 92 Loans at fair value Reverse repurchase agreements 2,240 9,271 11,511 Total loans 2,332 9,271 11,603 There are no material differences between the carrying values reflected above and the fair values of these loans. (iii) Fair value hierarchy Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the group\u2019s view of market assumptions in the absence of observable market information. The group utilises techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. 10 Financial investments and investment property continued (iii) Fair value hierarchy continued The levels of fair value measurement bases are defined as follows: Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on observable market data (unobservable inputs). All of the group\u2019s Level 2 assets have been valued using standard market pricing sources, such as IHS Markit, ICE and Bloomberg, or Index Providers such as Barclays, Merrill Lynch or JPMorgan. Each uses mathematical modelling and multiple source validation in order to determine consensus prices, with the exception of OTC Derivative holdings; OTCs are marked to market using an in-house system (Lombard Oberon), external vendor (IHS Markit), internal model or Counterparty Broker marks. In normal market conditions, we would consider these market prices to be observable market prices. Following consultation with our pricing providers and a number of their contributing brokers, we have considered that these prices are not from a suitably active market and have therefore classified them as Level 2. The group\u2019s investment properties are valued by appropriately qualified external valuers using unobservable inputs, resulting in all investment property being classified as Level 3. The group\u2019s policy is to re-assess categorisation of financial assets at the end of each reporting period and to recognise transfers between levels at that point in time. During 2020 the group enhanced the level of market data it uses to support the determination of the observability of valuation inputs, and this has increased the sensitivity of the levelling assessment to trading volumes, which in turn has increased the number of debt securities transferring between Level 1 and Level 2. At 31 December 2022 debt securities totalling net \u00a36.0bn (2021: \u00a35.2bn) transferred from Level 2 to Level 1 in the fair value hierarchy. Total Level 1 Level 2 Level 3 For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Shareholder Equity securities 3,071 1,236 41 1,794 Debt securities 70,663 17,239 31,339 22,085 Derivative assets 41,978 106 41,872 \u2013 Loans at fair value1 1,072 \u2013 1,072 \u2013 Investment property 5,644 \u2013 \u2013 5,644 Total Shareholder 122,428 18,581 74,324 29,523 Unit linked Equity securities 164,264 163,727 24 513 Debt securities 147,739 105,955 40,757 1,027 Derivative assets 3,449 164 3,285 \u2013 Loans at fair value 13, 211 \u2013 13,211 \u2013 Investment property 3,728 \u2013 \u2013 3,728 Total Unit linked 332,391 269,846 57,277 5,268 Total financial investments and investment property at fair value1 454,819 288,427 131,601 34,791 Total Level 1 Level 2 Level 3 For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Shareholder Equity securities 3,185 1,854 63 1,268 Debt securities 86,803 32,593 29,887 24,323 Derivative assets 13,203 9 13,194 \u2013 Loans at fair value1 2,240 \u2013 2,240 \u2013 Investment property 5,710 \u2013 \u2013 5,710 Total Shareholder 111,141 34,456 45,384 31,301 Unit linked Equity securities 209,864 209,119 25 720 Debt securities 210,127 170,838 38,726 563 Derivative assets 3,589 90 3,499 \u2013 Loans at fair value 9,271 \u2013 9,271 \u2013 Investment property 4,440 \u2013 \u2013 4,440 Total Unit linked 4 37, 291 380,047 51,521 5,723 Total financial investments and investment property at fair value1 548,432 414,503 96,905 37,024 1. Excludes loans (including accrued interest) of \u00a328m (2021: \u00a392m), which are held at amortised cost. (a) Level 3 assets measured at fair value Level 3 assets, where modelling techniques are used, are comprised of property, unquoted securities, untraded debt securities and securities where unquoted prices are provided by a single broker. Unquoted securities include suspended securities, investments in private equity and property vehicles. Untraded debt securities include private placements, commercial real estate loans, income strips, retirement interest only and other lifetime mortgages. In many situations, inputs used to measure the fair value of an asset or liability may fall into different levels of the fair value hierarchy. In these situations, the group determines the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value. As a result, both observable and unobservable inputs may be used in the determination of fair values that the group has classified within Level 3. The group determines the fair values of certain financial assets and liabilities based on quoted market prices, where available. The group also determines fair value based on estimated future cash flows discounted at the appropriate current market rate. As appropriate, fair values reflect adjustments for counterparty credit quality, the group\u2019s credit standing, liquidity and risk margins on unobservable inputs. Fair values are subject to a control framework designed to ensure that input variables and outputs are assessed independent of the risk taker. These inputs and outputs are reviewed and approved by a valuation committee and validated independently as appropriate. Other Other Equity financial Investment Equity financial Investment securities investments property Total securities investments property Total 2022 2022 2022 2022 2021 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m As at 1 January 1,988 24,886 10,150 37,024 1,801 21,957 8,475 32,233 Total gains/(losses) for the year \u2013 in other comprehensive income \u2013 2 \u2013 2 \u2013 (3) \u2013 (3) \u2013 realised gains/(losses)1 28 (9) 81 100 31 12 (4) 39 \u2013 unrealised gains/(losses) 1 83 (6,149) (1,796) (7,862) 208 (87) 1,028 1,149 Purchases/Additions 504 11,689 1,307 13,500 130 5,429 985 6,544 Sales/Disposals (381) (7,708) (377) (8,466) (153) (2,351) (334) (2,838) Transfers into Level 3 84 72 \u2013 156 2 10 \u2013 12 Transfers out of Level 3 (41) \u2013 \u2013 (41) (31) (112) \u2013 (143) Foreign exchange rate movements 42 329 7 378 \u2013 31 \u2013 31 As at 31 December 2,307 23,112 9,372 34,791 1,988 24,886 10,150 37,024 1. Realised and unrealised gains/(losses) are recognised in Investment return in the Consolidated Income Statement. Equity securities Level 3 equity securities amount to \u00a32,307m (2021: \u00a31,988m), of which the majority is made up of holdings in investment property vehicles and private investment funds. They are valued at the proportion of the group\u2019s holding of the Net Asset Value reported by the investment vehicles. Other equity securities are valued by a number of third party specialists using a range of techniques which are often dependent on the maturity of the underlying investment but can also depend on the characteristics of individual assets. Such techniques include transaction values underpinned by analysis of milestone achievement and cash runway for early/start-up stage investments, discounted cash flow models for investments at the next stage of development and earnings multiples for more mature investments. 10 Financial investments and investment property continued (iii) Fair value hierarchy continued (a) Level 3 assets measured at fair value continued Other financial investments Lifetime mortgage (LTM) loans and retirement interest only mortgages amount to \u00a34,844m (2021: \u00a36,857m). Lifetime mortgages are valued using a discounted cash flow model by projecting best-estimate net asset proceeds and discounted using rates inferred from current LTM loan pricing. The inferred illiquidity premiums for the majority of the portfolio range between 100 and 250bps. This ensures the value of loans at outset is consistent with the purchase price of the loan and achieves consistency between new and in-force loans. Lifetime mortgages include a no negative equity guarantee (NNEG) to borrowers. This ensures that if there is a shortfall between the sale proceeds of the property and the outstanding loan balance on redemption of the loan, the value of the loan will be reduced by this amount. The NNEG on loan redemption is valued as a series of put options, which we calculate using a variant of the Black-Scholes formula. Key assumptions in the valuation of lifetime mortgages include short-term and long-term property growth rates, property index volatility, voluntary early repayments and longevity assumptions. The valuation as at 31 December 2022 reflects a combination of short-term and long-term property growth rate assumptions equivalent to a flat rate of 2.6% annually, after allowing for the effects of dilapidation. The values of the properties collateralizing the LTM loans are updated from the date of the last property valuation to the valuation date by indexing using UK regional house price indices. Private credit loans (including commercial real estate loans) amount to \u00a313,461m (2021: \u00a313,521m). Their valuation is determined by discounted future cash flows which are based on the yield curve of the LGIM approved comparable bonds and the initial spread, both of which are agreed by IHS Markit who also provide an independent valuation of comparable bonds. Unobservable inputs that go into the determination of comparators include rating, sector, sub-sector, performance dynamics, financing structure and duration of investment. Existing private credit investments, which were executed as far back as 2011, are subject to a range of interest rate formats, although the majority are fixed rate. The weighted average duration of the portfolio is 7.8 years, with a weighted average life of 10.2 years. Maturities in the portfolio currently extend out to 2064. The private credit portfolio of assets has internal ratings assigned by an independent credit team in line with internally developed methodologies. These credit ratings range from AAA to BB-. Private placements held by the US business amount to \u00a32,310m (2021: \u00a31,762m). They are valued using a pricing matrix comprised of a public spread matrix, internal ratings assigned to each holding, average life of each holding, and a premium spread matrix. These are added to the risk-free rate to calculate the discounted cash flows and establish a market value for each investment grade private placement. The valuation as at 31 December 2022 reflects illiquidity premiums between 20 and 70bps. Income strip assets amount to \u00a31,414m (2021: \u00a31,626m). Their valuation is outsourced to Knight Frank and CBRE who apply a yield to maturity to discounted future cash flows to derive valuations. The overall valuation takes into account the property location, tenant details, tenure, rent, rental break terms, lease expiries and underlying residual value of the property. The valuation as at 31 December 2022 reflects equivalent yield ranges between 3% and 8% and estimated rental values (ERV) between \u00a35 and \u00a3310 per sq.ft. Commercial mortgage loans amount to \u00a31,000m (2021: \u00a31,021m) and are determined by incorporating credit risk for performing loans at the portfolio level and adjusted for loans identified to be distressed at the loan level. The projected cash flows of each loan are discounted along stochastic risk-free rate paths and are inclusive of an Option Adjusted Spread (OAS), derived from current internal pricing on new loans, along with the best observable inputs. The valuation as at 31 December 2022 reflects illiquidity premiums between 20 and 30bps. Other debt securities which are not traded in an active market amount to \u00a383m (2021: \u00a399m). They have been valued using third party or counterparty valuations, and these prices are considered to be unobservable due to infrequent market transactions. Investment property Level 3 investment property amounting to \u00a39,372m (2021: \u00a310,150m) is valued with the involvement of external valuers. All property valuations are carried out in accordance with the latest edition of the Valuation Standards published by the Royal Institute of Chartered Surveyors, and are undertaken by appropriately qualified valuers as defined therein. Whilst transaction evidence underpins the valuation process, the definition of market value, including the commentary, in practice requires the valuer to reflect the realities of the current market. In this context valuers must use their market knowledge and professional judgement and not rely only upon market sentiment based on historic transactional comparables. The valuation of investment properties also includes an income approach that is based on current rental income plus anticipated uplifts, where the uplift and discount rates are derived from rates implied by recent market transactions. These inputs are deemed unobservable. The valuation as at 31 December 2022 reflects equivalent yield ranges between 2% and 20% and ERV between \u00a31 and \u00a3357 per sq.ft. The table below shows the valuation of investment property by sector: 2022 2021 \u00a3m \u00a3m Retail 780 1,025 Leisure 461 482 Distribution 1,104 1,552 Office space 4,069 4,223 Industrial and other commercial 1,624 1,767 Accommodation 1,334 1,101 Total 9,372 10,150 (b) Effect of changes in assumptions on Level 3 assets Fair values of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data. Where material, the group assesses the sensitivity of fair values of Level 3 investments to changes in unobservable inputs to reasonable alternative assumptions. The table below shows the impact of applying these sensitivities to the fair value of Level 3 assets as at 31 December 2022. Further disclosure on how these sensitivities have been applied can be found in the descriptions following the table. Sensitivities Fair value 2022 \u00a3m Positive impact 2022 \u00a3m Negative impact 2022 \u00a3m Lifetime mortgages 4,844 189 (189) Private credit portfolios 16,771 911 (911) Investment property 9,372 812 (859) Other investments1 3,804 514 (289) Total Level 3 assets 34,791 2,426 (2,248) 1. Other investments include Level 3 equity securities, income strip assets and other traded debt securities which are Level 3. The sensitivities are not a function of sensitising a single variable relating to the valuation of the asset, but rather a function of flexing multiple factors often at individual asset level. The following sets out a number of key factors by asset type, and how they have been flexed to derive reasonable alternative valuations. Lifetime mortgages Key assumptions used in the valuation of lifetime mortgage assets are listed in Note 10(iii)(a) and sensitivities are applied to each assumption which are used to derive the values in the above table. The most significant reduction in value is -10% instant reduction in property valuation across the portfolio which, applied in isolation produces a sensitised value of \u00a3(75)m. The most significant increase in value is -10bps to the discount rate which, applied in isolation produces a sensitised value of \u00a365m. Private credit portfolios The sensitivity in the private credit portfolio has been determined through a method which estimates investment spread value premium differences as compared to the institutional investment market. Individual investment characteristics of each holding, such as credit rating and duration are used to determine spread differentials for the purposes of determining alternate values. Spread differentials are determined to be lower for highly rated and/or shorter duration assets as compared to lower rated and/or longer duration assets. A significant component of the spread differential is in relation to the selection of comparator bonds, which is the potential difference in spread of the basket of relevant comparators determined by respective investors. If we were to take an AA rated asset it may attract a spread differential of 15bps on the selection of comparator bonds as opposed to 40bps for a similar duration BBB rated asset. Applied in isolation the sensitivity used to reflect the spread in comparator bond selection results in sensitised values of \u00a3313m and \u00a3(313)m. 10 Financial investments and investment property continued (iii) Fair value hierarchy continued (b) Effect of changes in assumptions on Level 3 assets continued Investment property Investment property holdings are valued by independent valuers on the basis of open market value as defined in the appraisal and valuation manual of the Royal Institute of Chartered Surveyors (RICS). As such, sensitivities are calculated through a mixture of asset level and portfolio level methodologies which make reference to individual investment characteristics of the holding but do not flex individual assumptions used by the independent expert in valuing the holdings. Each method is applied individually and aggregated with equal weighting to determine the overall sensitivity determined for the portfolio. One method is similar to that used in the private credit portfolio as it determines the impact of an alternate property yield determined in reference to credit ratings, remaining term and other characteristics of each holding. In this methodology we would apply a lower yield sensitivity to a highly rated and/or shorter remaining term asset compared with a lower rated and/or longer remaining term asset. If we were to take an AA rated asset with remaining term of 25 years in normal market conditions this would lead to a 15bps yield flex (as opposed to a 35bps yield flex for a BBB rated asset with 30 year remaining term). The methodology which leads to the most significant sensitivity at the balance sheet date is related to an example in case law where it was found that an acceptable margin of error in a valuation dispute is 10% either way, subject to the valuation being undertaken with due care. If this sensitivity were to be taken without a weighting it would produce sensitised values of \u00a3603m and \u00a3(603)m. It should be noted that some sensitivities described above are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results. (iv) Interest rate benchmark reform In the UK, GBP LIBOR was replaced by SONIA from the end of 2021, and USD LIBOR is expected to be replaced by mid-2023. Euribor will remain but will be administered by the Euro Money Markets Institute (EMMI). The group transitioned away from GBP LIBOR by 31 December 2021, with only a few remaining cross currency positions which matured and rolled off in March 2022. As at 31 December 2022, a residual amount of floating-rate notes remains which reference a \u2018synthetic\u2019 LIBOR, as permitted. At the start of the transition project, the group\u2019s holding of USD LIBOR was significantly smaller than GBP LIBOR. Aligned with the different currency transition dates, trading out of USD LIBOR has been more gradual and the group holds interest rate swaps and floating-rate notes which still reference the index. It is expected that these will be replaced by USD SOFR before the 23 June 2023 transition date. The following table contains details of all the financial instruments currently subject to the IBOR reform that the group holds on its balance sheet at 31 December 2022 which have not yet transitioned to an alternative interest rate benchmark. The amounts of non-derivative financial assets are shown at their carrying amounts and derivatives are shown at their notional amounts. GBP LIBOR USD LIBOR Total GBP LIBOR USD LIBOR Total 2022 2022 2022 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Non-derivative financial assets Debt securities 64 110 174 229 55 284 Derivatives \u2013 32,460 32,460 743 59,356 60,099 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-553": { "value": "(i) Financial investments at fair value Unit Shareholder linked Total 2022 2022 2022 Notes \u00a3m \u00a3m \u00a3m Equity securities 3,071 164,264 167, 335 Debt securities 70,663 147,739 218,402 Derivative assets 12 41,978 3,449 45,427 Loans at fair value 10(ii) 1,072 13,211 14,283 Total financial investments at fair value 116,784 328,663 445,447 Unit Shareholder linked Total 2021 2021 2021 Notes \u00a3m \u00a3m \u00a3m Equity securities 3,185 209,864 213,049 Debt securities 86,803 210,127 296,930 Derivative assets 12 13,203 3,589 16,792 Loans at fair value 10(ii) 2,240 9,271 11,511 Total financial investments at fair value 105,431 432,851 538,282 Included within unit linked equity securities are \u00a3187m (2021: \u00a3237m) of debt instruments which incorporate an embedded derivative linked to the value of the group\u2019s share price. (ii) Loans Unit Shareholder linked Total 2022 2022 2022 \u00a3m \u00a3m \u00a3m Loans at amortised cost Policy loans 27 \u2013 27 Other loans and receivables 1 \u2013 1 28 \u2013 28 Loans at fair value Reverse repurchase agreements 1,072 13,211 14,283 Total loans 1,100 13,211 14,311 Unit Shareholder linked Total 2021 2021 2021 \u00a3m \u00a3m \u00a3m Loans at amortised cost Policy loans 30 \u2013 30 Other loans and receivables 62 \u2013 62 92 \u2013 92 Loans at fair value Reverse repurchase agreements 2,240 9,271 11,511 Total loans 2,332 9,271 11,603 There are no material differences between the carrying values reflected above and the fair values of these loans. (iii) Fair value hierarchy Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the group\u2019s view of market assumptions in the absence of observable market information. The group utilises techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. 10 Financial investments and investment property continued (iii) Fair value hierarchy continued The levels of fair value measurement bases are defined as follows: Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on observable market data (unobservable inputs). All of the group\u2019s Level 2 assets have been valued using standard market pricing sources, such as IHS Markit, ICE and Bloomberg, or Index Providers such as Barclays, Merrill Lynch or JPMorgan. Each uses mathematical modelling and multiple source validation in order to determine consensus prices, with the exception of OTC Derivative holdings; OTCs are marked to market using an in-house system (Lombard Oberon), external vendor (IHS Markit), internal model or Counterparty Broker marks. In normal market conditions, we would consider these market prices to be observable market prices. Following consultation with our pricing providers and a number of their contributing brokers, we have considered that these prices are not from a suitably active market and have therefore classified them as Level 2. The group\u2019s investment properties are valued by appropriately qualified external valuers using unobservable inputs, resulting in all investment property being classified as Level 3. The group\u2019s policy is to re-assess categorisation of financial assets at the end of each reporting period and to recognise transfers between levels at that point in time. During 2020 the group enhanced the level of market data it uses to support the determination of the observability of valuation inputs, and this has increased the sensitivity of the levelling assessment to trading volumes, which in turn has increased the number of debt securities transferring between Level 1 and Level 2. At 31 December 2022 debt securities totalling net \u00a36.0bn (2021: \u00a35.2bn) transferred from Level 2 to Level 1 in the fair value hierarchy. Total Level 1 Level 2 Level 3 For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Shareholder Equity securities 3,071 1,236 41 1,794 Debt securities 70,663 17,239 31,339 22,085 Derivative assets 41,978 106 41,872 \u2013 Loans at fair value1 1,072 \u2013 1,072 \u2013 Investment property 5,644 \u2013 \u2013 5,644 Total Shareholder 122,428 18,581 74,324 29,523 Unit linked Equity securities 164,264 163,727 24 513 Debt securities 147,739 105,955 40,757 1,027 Derivative assets 3,449 164 3,285 \u2013 Loans at fair value 13, 211 \u2013 13,211 \u2013 Investment property 3,728 \u2013 \u2013 3,728 Total Unit linked 332,391 269,846 57,277 5,268 Total financial investments and investment property at fair value1 454,819 288,427 131,601 34,791 Total Level 1 Level 2 Level 3 For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Shareholder Equity securities 3,185 1,854 63 1,268 Debt securities 86,803 32,593 29,887 24,323 Derivative assets 13,203 9 13,194 \u2013 Loans at fair value1 2,240 \u2013 2,240 \u2013 Investment property 5,710 \u2013 \u2013 5,710 Total Shareholder 111,141 34,456 45,384 31,301 Unit linked Equity securities 209,864 209,119 25 720 Debt securities 210,127 170,838 38,726 563 Derivative assets 3,589 90 3,499 \u2013 Loans at fair value 9,271 \u2013 9,271 \u2013 Investment property 4,440 \u2013 \u2013 4,440 Total Unit linked 4 37, 291 380,047 51,521 5,723 Total financial investments and investment property at fair value1 548,432 414,503 96,905 37,024 1. Excludes loans (including accrued interest) of \u00a328m (2021: \u00a392m), which are held at amortised cost. (a) Level 3 assets measured at fair value Level 3 assets, where modelling techniques are used, are comprised of property, unquoted securities, untraded debt securities and securities where unquoted prices are provided by a single broker. Unquoted securities include suspended securities, investments in private equity and property vehicles. Untraded debt securities include private placements, commercial real estate loans, income strips, retirement interest only and other lifetime mortgages. In many situations, inputs used to measure the fair value of an asset or liability may fall into different levels of the fair value hierarchy. In these situations, the group determines the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value. As a result, both observable and unobservable inputs may be used in the determination of fair values that the group has classified within Level 3. The group determines the fair values of certain financial assets and liabilities based on quoted market prices, where available. The group also determines fair value based on estimated future cash flows discounted at the appropriate current market rate. As appropriate, fair values reflect adjustments for counterparty credit quality, the group\u2019s credit standing, liquidity and risk margins on unobservable inputs. Fair values are subject to a control framework designed to ensure that input variables and outputs are assessed independent of the risk taker. These inputs and outputs are reviewed and approved by a valuation committee and validated independently as appropriate. Other Other Equity financial Investment Equity financial Investment securities investments property Total securities investments property Total 2022 2022 2022 2022 2021 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m As at 1 January 1,988 24,886 10,150 37,024 1,801 21,957 8,475 32,233 Total gains/(losses) for the year \u2013 in other comprehensive income \u2013 2 \u2013 2 \u2013 (3) \u2013 (3) \u2013 realised gains/(losses)1 28 (9) 81 100 31 12 (4) 39 \u2013 unrealised gains/(losses) 1 83 (6,149) (1,796) (7,862) 208 (87) 1,028 1,149 Purchases/Additions 504 11,689 1,307 13,500 130 5,429 985 6,544 Sales/Disposals (381) (7,708) (377) (8,466) (153) (2,351) (334) (2,838) Transfers into Level 3 84 72 \u2013 156 2 10 \u2013 12 Transfers out of Level 3 (41) \u2013 \u2013 (41) (31) (112) \u2013 (143) Foreign exchange rate movements 42 329 7 378 \u2013 31 \u2013 31 As at 31 December 2,307 23,112 9,372 34,791 1,988 24,886 10,150 37,024 1. Realised and unrealised gains/(losses) are recognised in Investment return in the Consolidated Income Statement. Equity securities Level 3 equity securities amount to \u00a32,307m (2021: \u00a31,988m), of which the majority is made up of holdings in investment property vehicles and private investment funds. They are valued at the proportion of the group\u2019s holding of the Net Asset Value reported by the investment vehicles. Other equity securities are valued by a number of third party specialists using a range of techniques which are often dependent on the maturity of the underlying investment but can also depend on the characteristics of individual assets. Such techniques include transaction values underpinned by analysis of milestone achievement and cash runway for early/start-up stage investments, discounted cash flow models for investments at the next stage of development and earnings multiples for more mature investments. 10 Financial investments and investment property continued (iii) Fair value hierarchy continued (a) Level 3 assets measured at fair value continued Other financial investments Lifetime mortgage (LTM) loans and retirement interest only mortgages amount to \u00a34,844m (2021: \u00a36,857m). Lifetime mortgages are valued using a discounted cash flow model by projecting best-estimate net asset proceeds and discounted using rates inferred from current LTM loan pricing. The inferred illiquidity premiums for the majority of the portfolio range between 100 and 250bps. This ensures the value of loans at outset is consistent with the purchase price of the loan and achieves consistency between new and in-force loans. Lifetime mortgages include a no negative equity guarantee (NNEG) to borrowers. This ensures that if there is a shortfall between the sale proceeds of the property and the outstanding loan balance on redemption of the loan, the value of the loan will be reduced by this amount. The NNEG on loan redemption is valued as a series of put options, which we calculate using a variant of the Black-Scholes formula. Key assumptions in the valuation of lifetime mortgages include short-term and long-term property growth rates, property index volatility, voluntary early repayments and longevity assumptions. The valuation as at 31 December 2022 reflects a combination of short-term and long-term property growth rate assumptions equivalent to a flat rate of 2.6% annually, after allowing for the effects of dilapidation. The values of the properties collateralizing the LTM loans are updated from the date of the last property valuation to the valuation date by indexing using UK regional house price indices. Private credit loans (including commercial real estate loans) amount to \u00a313,461m (2021: \u00a313,521m). Their valuation is determined by discounted future cash flows which are based on the yield curve of the LGIM approved comparable bonds and the initial spread, both of which are agreed by IHS Markit who also provide an independent valuation of comparable bonds. Unobservable inputs that go into the determination of comparators include rating, sector, sub-sector, performance dynamics, financing structure and duration of investment. Existing private credit investments, which were executed as far back as 2011, are subject to a range of interest rate formats, although the majority are fixed rate. The weighted average duration of the portfolio is 7.8 years, with a weighted average life of 10.2 years. Maturities in the portfolio currently extend out to 2064. The private credit portfolio of assets has internal ratings assigned by an independent credit team in line with internally developed methodologies. These credit ratings range from AAA to BB-. Private placements held by the US business amount to \u00a32,310m (2021: \u00a31,762m). They are valued using a pricing matrix comprised of a public spread matrix, internal ratings assigned to each holding, average life of each holding, and a premium spread matrix. These are added to the risk-free rate to calculate the discounted cash flows and establish a market value for each investment grade private placement. The valuation as at 31 December 2022 reflects illiquidity premiums between 20 and 70bps. Income strip assets amount to \u00a31,414m (2021: \u00a31,626m). Their valuation is outsourced to Knight Frank and CBRE who apply a yield to maturity to discounted future cash flows to derive valuations. The overall valuation takes into account the property location, tenant details, tenure, rent, rental break terms, lease expiries and underlying residual value of the property. The valuation as at 31 December 2022 reflects equivalent yield ranges between 3% and 8% and estimated rental values (ERV) between \u00a35 and \u00a3310 per sq.ft. Commercial mortgage loans amount to \u00a31,000m (2021: \u00a31,021m) and are determined by incorporating credit risk for performing loans at the portfolio level and adjusted for loans identified to be distressed at the loan level. The projected cash flows of each loan are discounted along stochastic risk-free rate paths and are inclusive of an Option Adjusted Spread (OAS), derived from current internal pricing on new loans, along with the best observable inputs. The valuation as at 31 December 2022 reflects illiquidity premiums between 20 and 30bps. Other debt securities which are not traded in an active market amount to \u00a383m (2021: \u00a399m). They have been valued using third party or counterparty valuations, and these prices are considered to be unobservable due to infrequent market transactions. Investment property Level 3 investment property amounting to \u00a39,372m (2021: \u00a310,150m) is valued with the involvement of external valuers. All property valuations are carried out in accordance with the latest edition of the Valuation Standards published by the Royal Institute of Chartered Surveyors, and are undertaken by appropriately qualified valuers as defined therein. Whilst transaction evidence underpins the valuation process, the definition of market value, including the commentary, in practice requires the valuer to reflect the realities of the current market. In this context valuers must use their market knowledge and professional judgement and not rely only upon market sentiment based on historic transactional comparables. The valuation of investment properties also includes an income approach that is based on current rental income plus anticipated uplifts, where the uplift and discount rates are derived from rates implied by recent market transactions. These inputs are deemed unobservable. The valuation as at 31 December 2022 reflects equivalent yield ranges between 2% and 20% and ERV between \u00a31 and \u00a3357 per sq.ft. The table below shows the valuation of investment property by sector: 2022 2021 \u00a3m \u00a3m Retail 780 1,025 Leisure 461 482 Distribution 1,104 1,552 Office space 4,069 4,223 Industrial and other commercial 1,624 1,767 Accommodation 1,334 1,101 Total 9,372 10,150 (b) Effect of changes in assumptions on Level 3 assets Fair values of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data. Where material, the group assesses the sensitivity of fair values of Level 3 investments to changes in unobservable inputs to reasonable alternative assumptions. The table below shows the impact of applying these sensitivities to the fair value of Level 3 assets as at 31 December 2022. Further disclosure on how these sensitivities have been applied can be found in the descriptions following the table. Sensitivities Fair value 2022 \u00a3m Positive impact 2022 \u00a3m Negative impact 2022 \u00a3m Lifetime mortgages 4,844 189 (189) Private credit portfolios 16,771 911 (911) Investment property 9,372 812 (859) Other investments1 3,804 514 (289) Total Level 3 assets 34,791 2,426 (2,248) 1. Other investments include Level 3 equity securities, income strip assets and other traded debt securities which are Level 3. The sensitivities are not a function of sensitising a single variable relating to the valuation of the asset, but rather a function of flexing multiple factors often at individual asset level. The following sets out a number of key factors by asset type, and how they have been flexed to derive reasonable alternative valuations. Lifetime mortgages Key assumptions used in the valuation of lifetime mortgage assets are listed in Note 10(iii)(a) and sensitivities are applied to each assumption which are used to derive the values in the above table. The most significant reduction in value is -10% instant reduction in property valuation across the portfolio which, applied in isolation produces a sensitised value of \u00a3(75)m. The most significant increase in value is -10bps to the discount rate which, applied in isolation produces a sensitised value of \u00a365m. Private credit portfolios The sensitivity in the private credit portfolio has been determined through a method which estimates investment spread value premium differences as compared to the institutional investment market. Individual investment characteristics of each holding, such as credit rating and duration are used to determine spread differentials for the purposes of determining alternate values. Spread differentials are determined to be lower for highly rated and/or shorter duration assets as compared to lower rated and/or longer duration assets. A significant component of the spread differential is in relation to the selection of comparator bonds, which is the potential difference in spread of the basket of relevant comparators determined by respective investors. If we were to take an AA rated asset it may attract a spread differential of 15bps on the selection of comparator bonds as opposed to 40bps for a similar duration BBB rated asset. Applied in isolation the sensitivity used to reflect the spread in comparator bond selection results in sensitised values of \u00a3313m and \u00a3(313)m. 10 Financial investments and investment property continued (iii) Fair value hierarchy continued (b) Effect of changes in assumptions on Level 3 assets continued Investment property Investment property holdings are valued by independent valuers on the basis of open market value as defined in the appraisal and valuation manual of the Royal Institute of Chartered Surveyors (RICS). As such, sensitivities are calculated through a mixture of asset level and portfolio level methodologies which make reference to individual investment characteristics of the holding but do not flex individual assumptions used by the independent expert in valuing the holdings. Each method is applied individually and aggregated with equal weighting to determine the overall sensitivity determined for the portfolio. One method is similar to that used in the private credit portfolio as it determines the impact of an alternate property yield determined in reference to credit ratings, remaining term and other characteristics of each holding. In this methodology we would apply a lower yield sensitivity to a highly rated and/or shorter remaining term asset compared with a lower rated and/or longer remaining term asset. If we were to take an AA rated asset with remaining term of 25 years in normal market conditions this would lead to a 15bps yield flex (as opposed to a 35bps yield flex for a BBB rated asset with 30 year remaining term). The methodology which leads to the most significant sensitivity at the balance sheet date is related to an example in case law where it was found that an acceptable margin of error in a valuation dispute is 10% either way, subject to the valuation being undertaken with due care. If this sensitivity were to be taken without a weighting it would produce sensitised values of \u00a3603m and \u00a3(603)m. It should be noted that some sensitivities described above are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results. (iv) Interest rate benchmark reform In the UK, GBP LIBOR was replaced by SONIA from the end of 2021, and USD LIBOR is expected to be replaced by mid-2023. Euribor will remain but will be administered by the Euro Money Markets Institute (EMMI). The group transitioned away from GBP LIBOR by 31 December 2021, with only a few remaining cross currency positions which matured and rolled off in March 2022. As at 31 December 2022, a residual amount of floating-rate notes remains which reference a \u2018synthetic\u2019 LIBOR, as permitted. At the start of the transition project, the group\u2019s holding of USD LIBOR was significantly smaller than GBP LIBOR. Aligned with the different currency transition dates, trading out of USD LIBOR has been more gradual and the group holds interest rate swaps and floating-rate notes which still reference the index. It is expected that these will be replaced by USD SOFR before the 23 June 2023 transition date. The following table contains details of all the financial instruments currently subject to the IBOR reform that the group holds on its balance sheet at 31 December 2022 which have not yet transitioned to an alternative interest rate benchmark. The amounts of non-derivative financial assets are shown at their carrying amounts and derivatives are shown at their notional amounts. GBP LIBOR USD LIBOR Total GBP LIBOR USD LIBOR Total 2022 2022 2022 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Non-derivative financial assets Debt securities 64 110 174 229 55 284 Derivatives \u2013 32,460 32,460 743 59,356 60,099 ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-631": { "value": "10 Financial investments and investment property continued (iii) Fair value hierarchy continued The levels of fair value measurement bases are defined as follows: Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on observable market data (unobservable inputs). All of the group\u2019s Level 2 assets have been valued using standard market pricing sources, such as IHS Markit, ICE and Bloomberg, or Index Providers such as Barclays, Merrill Lynch or JPMorgan. Each uses mathematical modelling and multiple source validation in order to determine consensus prices, with the exception of OTC Derivative holdings; OTCs are marked to market using an in-house system (Lombard Oberon), external vendor (IHS Markit), internal model or Counterparty Broker marks. In normal market conditions, we would consider these market prices to be observable market prices. Following consultation with our pricing providers and a number of their contributing brokers, we have considered that these prices are not from a suitably active market and have therefore classified them as Level 2. The group\u2019s investment properties are valued by appropriately qualified external valuers using unobservable inputs, resulting in all investment property being classified as Level 3. The group\u2019s policy is to re-assess categorisation of financial assets at the end of each reporting period and to recognise transfers between levels at that point in time. During 2020 the group enhanced the level of market data it uses to support the determination of the observability of valuation inputs, and this has increased the sensitivity of the levelling assessment to trading volumes, which in turn has increased the number of debt securities transferring between Level 1 and Level 2. At 31 December 2022 debt securities totalling net \u00a36.0bn (2021: \u00a35.2bn) transferred from Level 2 to Level 1 in the fair value hierarchy. Total Level 1 Level 2 Level 3 For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Shareholder Equity securities 3,071 1,236 41 1,794 Debt securities 70,663 17,239 31,339 22,085 Derivative assets 41,978 106 41,872 \u2013 Loans at fair value1 1,072 \u2013 1,072 \u2013 Investment property 5,644 \u2013 \u2013 5,644 Total Shareholder 122,428 18,581 74,324 29,523 Unit linked Equity securities 164,264 163,727 24 513 Debt securities 147,739 105,955 40,757 1,027 Derivative assets 3,449 164 3,285 \u2013 Loans at fair value 13, 211 \u2013 13,211 \u2013 Investment property 3,728 \u2013 \u2013 3,728 Total Unit linked 332,391 269,846 57,277 5,268 Total financial investments and investment property at fair value1 454,819 288,427 131,601 34,791 Total Level 1 Level 2 Level 3 For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Shareholder Equity securities 3,185 1,854 63 1,268 Debt securities 86,803 32,593 29,887 24,323 Derivative assets 13,203 9 13,194 \u2013 Loans at fair value1 2,240 \u2013 2,240 \u2013 Investment property 5,710 \u2013 \u2013 5,710 Total Shareholder 111,141 34,456 45,384 31,301 Unit linked Equity securities 209,864 209,119 25 720 Debt securities 210,127 170,838 38,726 563 Derivative assets 3,589 90 3,499 \u2013 Loans at fair value 9,271 \u2013 9,271 \u2013 Investment property 4,440 \u2013 \u2013 4,440 Total Unit linked 4 37, 291 380,047 51,521 5,723 Total financial investments and investment property at fair value1 548,432 414,503 96,905 37,024 1. Excludes loans (including accrued interest) of \u00a328m (2021: \u00a392m), which are held at amortised cost. (a) Level 3 assets measured at fair value Level 3 assets, where modelling techniques are used, are comprised of property, unquoted securities, untraded debt securities and securities where unquoted prices are provided by a single broker. Unquoted securities include suspended securities, investments in private equity and property vehicles. Untraded debt securities include private placements, commercial real estate loans, income strips, retirement interest only and other lifetime mortgages. In many situations, inputs used to measure the fair value of an asset or liability may fall into different levels of the fair value hierarchy. In these situations, the group determines the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value. As a result, both observable and unobservable inputs may be used in the determination of fair values that the group has classified within Level 3. The group determines the fair values of certain financial assets and liabilities based on quoted market prices, where available. The group also determines fair value based on estimated future cash flows discounted at the appropriate current market rate. As appropriate, fair values reflect adjustments for counterparty credit quality, the group\u2019s credit standing, liquidity and risk margins on unobservable inputs. Fair values are subject to a control framework designed to ensure that input variables and outputs are assessed independent of the risk taker. These inputs and outputs are reviewed and approved by a valuation committee and validated independently as appropriate. Other Other Equity financial Investment Equity financial Investment securities investments property Total securities investments property Total 2022 2022 2022 2022 2021 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m As at 1 January 1,988 24,886 10,150 37,024 1,801 21,957 8,475 32,233 Total gains/(losses) for the year \u2013 in other comprehensive income \u2013 2 \u2013 2 \u2013 (3) \u2013 (3) \u2013 realised gains/(losses)1 28 (9) 81 100 31 12 (4) 39 \u2013 unrealised gains/(losses) 1 83 (6,149) (1,796) (7,862) 208 (87) 1,028 1,149 Purchases/Additions 504 11,689 1,307 13,500 130 5,429 985 6,544 Sales/Disposals (381) (7,708) (377) (8,466) (153) (2,351) (334) (2,838) Transfers into Level 3 84 72 \u2013 156 2 10 \u2013 12 Transfers out of Level 3 (41) \u2013 \u2013 (41) (31) (112) \u2013 (143) Foreign exchange rate movements 42 329 7 378 \u2013 31 \u2013 31 As at 31 December 2,307 23,112 9,372 34,791 1,988 24,886 10,150 37,024 1. Realised and unrealised gains/(losses) are recognised in Investment return in the Consolidated Income Statement. Equity securities Level 3 equity securities amount to \u00a32,307m (2021: \u00a31,988m), of which the majority is made up of holdings in investment property vehicles and private investment funds. They are valued at the proportion of the group\u2019s holding of the Net Asset Value reported by the investment vehicles. Other equity securities are valued by a number of third party specialists using a range of techniques which are often dependent on the maturity of the underlying investment but can also depend on the characteristics of individual assets. Such techniques include transaction values underpinned by analysis of milestone achievement and cash runway for early/start-up stage investments, discounted cash flow models for investments at the next stage of development and earnings multiples for more mature investments. 10 Financial investments and investment property continued (iii) Fair value hierarchy continued (a) Level 3 assets measured at fair value continued Other financial investments Lifetime mortgage (LTM) loans and retirement interest only mortgages amount to \u00a34,844m (2021: \u00a36,857m). Lifetime mortgages are valued using a discounted cash flow model by projecting best-estimate net asset proceeds and discounted using rates inferred from current LTM loan pricing. The inferred illiquidity premiums for the majority of the portfolio range between 100 and 250bps. This ensures the value of loans at outset is consistent with the purchase price of the loan and achieves consistency between new and in-force loans. Lifetime mortgages include a no negative equity guarantee (NNEG) to borrowers. This ensures that if there is a shortfall between the sale proceeds of the property and the outstanding loan balance on redemption of the loan, the value of the loan will be reduced by this amount. The NNEG on loan redemption is valued as a series of put options, which we calculate using a variant of the Black-Scholes formula. Key assumptions in the valuation of lifetime mortgages include short-term and long-term property growth rates, property index volatility, voluntary early repayments and longevity assumptions. The valuation as at 31 December 2022 reflects a combination of short-term and long-term property growth rate assumptions equivalent to a flat rate of 2.6% annually, after allowing for the effects of dilapidation. The values of the properties collateralizing the LTM loans are updated from the date of the last property valuation to the valuation date by indexing using UK regional house price indices. Private credit loans (including commercial real estate loans) amount to \u00a313,461m (2021: \u00a313,521m). Their valuation is determined by discounted future cash flows which are based on the yield curve of the LGIM approved comparable bonds and the initial spread, both of which are agreed by IHS Markit who also provide an independent valuation of comparable bonds. Unobservable inputs that go into the determination of comparators include rating, sector, sub-sector, performance dynamics, financing structure and duration of investment. Existing private credit investments, which were executed as far back as 2011, are subject to a range of interest rate formats, although the majority are fixed rate. The weighted average duration of the portfolio is 7.8 years, with a weighted average life of 10.2 years. Maturities in the portfolio currently extend out to 2064. The private credit portfolio of assets has internal ratings assigned by an independent credit team in line with internally developed methodologies. These credit ratings range from AAA to BB-. Private placements held by the US business amount to \u00a32,310m (2021: \u00a31,762m). They are valued using a pricing matrix comprised of a public spread matrix, internal ratings assigned to each holding, average life of each holding, and a premium spread matrix. These are added to the risk-free rate to calculate the discounted cash flows and establish a market value for each investment grade private placement. The valuation as at 31 December 2022 reflects illiquidity premiums between 20 and 70bps. Income strip assets amount to \u00a31,414m (2021: \u00a31,626m). Their valuation is outsourced to Knight Frank and CBRE who apply a yield to maturity to discounted future cash flows to derive valuations. The overall valuation takes into account the property location, tenant details, tenure, rent, rental break terms, lease expiries and underlying residual value of the property. The valuation as at 31 December 2022 reflects equivalent yield ranges between 3% and 8% and estimated rental values (ERV) between \u00a35 and \u00a3310 per sq.ft. Commercial mortgage loans amount to \u00a31,000m (2021: \u00a31,021m) and are determined by incorporating credit risk for performing loans at the portfolio level and adjusted for loans identified to be distressed at the loan level. The projected cash flows of each loan are discounted along stochastic risk-free rate paths and are inclusive of an Option Adjusted Spread (OAS), derived from current internal pricing on new loans, along with the best observable inputs. The valuation as at 31 December 2022 reflects illiquidity premiums between 20 and 30bps. Other debt securities which are not traded in an active market amount to \u00a383m (2021: \u00a399m). They have been valued using third party or counterparty valuations, and these prices are considered to be unobservable due to infrequent market transactions. Investment property Level 3 investment property amounting to \u00a39,372m (2021: \u00a310,150m) is valued with the involvement of external valuers. All property valuations are carried out in accordance with the latest edition of the Valuation Standards published by the Royal Institute of Chartered Surveyors, and are undertaken by appropriately qualified valuers as defined therein. Whilst transaction evidence underpins the valuation process, the definition of market value, including the commentary, in practice requires the valuer to reflect the realities of the current market. In this context valuers must use their market knowledge and professional judgement and not rely only upon market sentiment based on historic transactional comparables. The valuation of investment properties also includes an income approach that is based on current rental income plus anticipated uplifts, where the uplift and discount rates are derived from rates implied by recent market transactions. These inputs are deemed unobservable. The valuation as at 31 December 2022 reflects equivalent yield ranges between 2% and 20% and ERV between \u00a31 and \u00a3357 per sq.ft. The table below shows the valuation of investment property by sector: 2022 2021 \u00a3m \u00a3m Retail 780 1,025 Leisure 461 482 Distribution 1,104 1,552 Office space 4,069 4,223 Industrial and other commercial 1,624 1,767 Accommodation 1,334 1,101 Total 9,372 10,150 (b) Effect of changes in assumptions on Level 3 assets Fair values of financial instruments are, in certain circumstances, measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable current market transactions in the same instrument and are not based on observable market data. Where material, the group assesses the sensitivity of fair values of Level 3 investments to changes in unobservable inputs to reasonable alternative assumptions. The table below shows the impact of applying these sensitivities to the fair value of Level 3 assets as at 31 December 2022. Further disclosure on how these sensitivities have been applied can be found in the descriptions following the table. Sensitivities Fair value 2022 \u00a3m Positive impact 2022 \u00a3m Negative impact 2022 \u00a3m Lifetime mortgages 4,844 189 (189) Private credit portfolios 16,771 911 (911) Investment property 9,372 812 (859) Other investments1 3,804 514 (289) Total Level 3 assets 34,791 2,426 (2,248) 1. Other investments include Level 3 equity securities, income strip assets and other traded debt securities which are Level 3. The sensitivities are not a function of sensitising a single variable relating to the valuation of the asset, but rather a function of flexing multiple factors often at individual asset level. The following sets out a number of key factors by asset type, and how they have been flexed to derive reasonable alternative valuations. Lifetime mortgages Key assumptions used in the valuation of lifetime mortgage assets are listed in Note 10(iii)(a) and sensitivities are applied to each assumption which are used to derive the values in the above table. The most significant reduction in value is -10% instant reduction in property valuation across the portfolio which, applied in isolation produces a sensitised value of \u00a3(75)m. The most significant increase in value is -10bps to the discount rate which, applied in isolation produces a sensitised value of \u00a365m. Private credit portfolios The sensitivity in the private credit portfolio has been determined through a method which estimates investment spread value premium differences as compared to the institutional investment market. Individual investment characteristics of each holding, such as credit rating and duration are used to determine spread differentials for the purposes of determining alternate values. Spread differentials are determined to be lower for highly rated and/or shorter duration assets as compared to lower rated and/or longer duration assets. A significant component of the spread differential is in relation to the selection of comparator bonds, which is the potential difference in spread of the basket of relevant comparators determined by respective investors. If we were to take an AA rated asset it may attract a spread differential of 15bps on the selection of comparator bonds as opposed to 40bps for a similar duration BBB rated asset. Applied in isolation the sensitivity used to reflect the spread in comparator bond selection results in sensitised values of \u00a3313m and \u00a3(313)m. 10 Financial investments and investment property continued (iii) Fair value hierarchy continued (b) Effect of changes in assumptions on Level 3 assets continued Investment property Investment property holdings are valued by independent valuers on the basis of open market value as defined in the appraisal and valuation manual of the Royal Institute of Chartered Surveyors (RICS). As such, sensitivities are calculated through a mixture of asset level and portfolio level methodologies which make reference to individual investment characteristics of the holding but do not flex individual assumptions used by the independent expert in valuing the holdings. Each method is applied individually and aggregated with equal weighting to determine the overall sensitivity determined for the portfolio. One method is similar to that used in the private credit portfolio as it determines the impact of an alternate property yield determined in reference to credit ratings, remaining term and other characteristics of each holding. In this methodology we would apply a lower yield sensitivity to a highly rated and/or shorter remaining term asset compared with a lower rated and/or longer remaining term asset. If we were to take an AA rated asset with remaining term of 25 years in normal market conditions this would lead to a 15bps yield flex (as opposed to a 35bps yield flex for a BBB rated asset with 30 year remaining term). The methodology which leads to the most significant sensitivity at the balance sheet date is related to an example in case law where it was found that an acceptable margin of error in a valuation dispute is 10% either way, subject to the valuation being undertaken with due care. If this sensitivity were to be taken without a weighting it would produce sensitised values of \u00a3603m and \u00a3(603)m. It should be noted that some sensitivities described above are non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results. (iv) Interest rate benchmark reform In the UK, GBP LIBOR was replaced by SONIA from the end of 2021, and USD LIBOR is expected to be replaced by mid-2023. Euribor will remain but will be administered by the Euro Money Markets Institute (EMMI). The group transitioned away from GBP LIBOR by 31 December 2021, with only a few remaining cross currency positions which matured and rolled off in March 2022. As at 31 December 2022, a residual amount of floating-rate notes remains which reference a \u2018synthetic\u2019 LIBOR, as permitted. At the start of the transition project, the group\u2019s holding of USD LIBOR was significantly smaller than GBP LIBOR. Aligned with the different currency transition dates, trading out of USD LIBOR has been more gradual and the group holds interest rate swaps and floating-rate notes which still reference the index. It is expected that these will be replaced by USD SOFR before the 23 June 2023 transition date. The following table contains details of all the financial instruments currently subject to the IBOR reform that the group holds on its balance sheet at 31 December 2022 which have not yet transitioned to an alternative interest rate benchmark. The amounts of non-derivative financial assets are shown at their carrying amounts and derivatives are shown at their notional amounts. GBP LIBOR USD LIBOR Total GBP LIBOR USD LIBOR Total 2022 2022 2022 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Non-derivative financial assets Debt securities 64 110 174 229 55 284 Derivatives \u2013 32,460 32,460 743 59,356 60,099 ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-554": { "value": "As required by the amendments to IFRS 4 \u2018Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts\u2019, the disclosures below are presented in order to provide users of the financial statements with information which allows them to compare financial assets when IFRS 9 is not applied with those of entities applying IFRS 9. All entities within the group whose activities are not primarily insurance related and which prepare financial statements on an IFRS basis (including UK entities qualifying for disclosure exemptions under FRS 101, \u2018Reduced Disclosure Framework\u2019) implemented IFRS 9 in 2018. The financial statements of these entities made available through Companies House. ", "dimensions": { "concept": "legalandgeneral:DescriptionOfAccountingPolicyForIFRS9FinancialInstrumentsDeferral", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-555": { "value": "(i) Fair value of financial assets with contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (passing the SPPI test): Financial assets passing the SPPI test1,2 All other financial assets3 Financial assets passing the SPPI test1,2 All other financial assets 3 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Equity securities \u2013 167, 335 \u2013 213,049 Debt securities 1,729 216,673 2,296 294,634 Derivative assets \u2013 45,427 \u2013 16,792 Loans at fair value \u2013 14,283 \u2013 11,511 Total financial investments at fair value 1,729 443,718 2,296 535,986 Loans at amortised cost 28 \u2013 92 \u2013 Reinsurance receivables 291 \u2013 84 \u2013 Insurance and intermediaries receivables 36 40 60 9 Other financial assets 9,173 236 5,171 \u2013 Total fair value of financial assets4 11, 257 443,994 7,703 535,995 1. Financial assets classified as held for trading or that are managed and whose performance is evaluated on a fair value basis do not require an SPPI test to be performed. These assets are reported in All other financial assets. 2. For financial assets which pass the SPPI test held at 31 December 2022 there was a change in fair value during the year of \u00a3(237)m (2021: \u00a3(64)m). 3. For all other financial assets held at 31 December 2022 there was a change in fair value during the year of \u00a3(107,453)m (2021: \u00a325,093m). 4. Financial assets exclude cash and cash equivalents and receivables under finance leases. (ii) Credit risk information of financial assets passing the SPPI test: AAA AA A BBB BB or below 1 Other 2 Total 2022 2022 2022 2022 2022 2022 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Total financial investments at fair value 204 158 232 1,086 24 25 1,729 Loans at amortised cost \u2013 \u2013 \u2013 \u2013 \u2013 28 28 Reinsurance receivables \u2013 207 \u2013 \u2013 \u2013 84 291 Insurance and intermediaries receivables \u2013 \u2013 \u2013 \u2013 \u2013 36 36 Other financial assets 4 72 10 10 \u2013 9,077 9,173 Total carrying value of financial assets passing the SPPI test 3 208 437 242 1,096 24 9,250 11, 257 AAA AA A BBB BB or below1 Other2 Total 2021 2021 2021 2021 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Total financial investments at fair value 327 257 485 1,180 47 \u2013 2,296 Loans at amortised cost \u2013 \u2013 1 \u2013 \u2013 91 92 Reinsurance receivables \u2013 \u2013 \u2013 \u2013 \u2013 84 84 Insurance and intermediaries receivables \u2013 \u2013 \u2013 \u2013 \u2013 60 60 Other financial assets \u2013 1 91 9 2 5,068 5,171 Total carrying value of financial assets passing the SPPI test 3 327 258 577 1,189 49 5,303 7,70 3 1. Financial assets classified as \u2018BB or below\u2019 are considered to be lower than investment grade, and therefore are not deemed to have low credit risk under IFRS 9. 2. Other financial assets are made up of unrated and short-term receivables for which a formal credit rating is not assigned. The fair value of financial assets passing the SPPI test that are not deemed to have low credit risk as at 31 December 2022 is \u00a342m (31 December 2021: \u00a381m). 3. Financial assets exclude cash and cash equivalents and receivables under finance leases. The fair value of these assets approximates to their carrying value. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfIFRS9FinancialInstrumentsDeferral", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-615": { "value": "The group uses derivatives as a component of efficient portfolio management. This includes, but is not limited to, hedging economic exposure to foreign currencies, interest rates, inflation and credit risks. The group uses hedge accounting, provided the prescribed criteria in IAS 39, \u2018Financial instruments: Recognition and measurement\u2019 are met, to recognise the offsetting effects of changes in the fair value or cash flow of the derivative instrument and the hedged item. The principal uses of hedge accounting are to: (i) Defer in equity the changes in the fair value of derivatives designated as the hedge of a future cash flow attributable to a recognised asset or liability, a highly probable forecast transaction, or a firm commitment until the period in which the future transaction affects profit or loss or is no longer expected to occur; (ii) Hedge the exposure to fair value movements of a recognised asset or liability or an unrecognised firm commitment, or a component of any such item, that is attributable to a particular risk and could affect the Consolidated Income Statement; and (iii) Hedge the exposure to the currency risk associated with a net investment in a foreign operation. The relationship between the hedging instrument and the hedged item, together with the risk management objective and strategy for undertaking the hedge transaction, are documented at the inception of the transaction. The effectiveness of the hedge is documented and monitored on an ongoing basis. Hedge accounting is only applied for highly effective hedges (between 80% and 125% effectiveness) with any ineffective portion of the gain or loss recognised in the Consolidated Income Statement in the current year. Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments which do not qualify for hedge accounting are recognised immediately in the Consolidated Income Statement. Where the risks and characteristics of derivatives embedded in other contracts are not closely related to those of the host contract and the whole contract is not carried at fair value, the derivative is separated from that host contract and measured at fair value, with fair value movements reflected within investment return, unless the embedded derivative itself meets the definition of an insurance contract. Cash inflows and outflows are presented on a net basis where the group is required to settle net or has a legally enforceable right of offset and the intention is to settle on a net basis. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-556": { "value": "The group uses derivatives as a component of efficient portfolio management. This includes, but is not limited to, hedging economic exposure to foreign currencies, interest rates, inflation and credit risks. The group uses hedge accounting, provided the prescribed criteria in IAS 39, \u2018Financial instruments: Recognition and measurement\u2019 are met, to recognise the offsetting effects of changes in the fair value or cash flow of the derivative instrument and the hedged item. The principal uses of hedge accounting are to: (i) Defer in equity the changes in the fair value of derivatives designated as the hedge of a future cash flow attributable to a recognised asset or liability, a highly probable forecast transaction, or a firm commitment until the period in which the future transaction affects profit or loss or is no longer expected to occur; (ii) Hedge the exposure to fair value movements of a recognised asset or liability or an unrecognised firm commitment, or a component of any such item, that is attributable to a particular risk and could affect the Consolidated Income Statement; and (iii) Hedge the exposure to the currency risk associated with a net investment in a foreign operation. The relationship between the hedging instrument and the hedged item, together with the risk management objective and strategy for undertaking the hedge transaction, are documented at the inception of the transaction. The effectiveness of the hedge is documented and monitored on an ongoing basis. Hedge accounting is only applied for highly effective hedges (between 80% and 125% effectiveness) with any ineffective portion of the gain or loss recognised in the Consolidated Income Statement in the current year. Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments which do not qualify for hedge accounting are recognised immediately in the Consolidated Income Statement. Where the risks and characteristics of derivatives embedded in other contracts are not closely related to those of the host contract and the whole contract is not carried at fair value, the derivative is separated from that host contract and measured at fair value, with fair value movements reflected within investment return, unless the embedded derivative itself meets the definition of an insurance contract. Cash inflows and outflows are presented on a net basis where the group is required to settle net or has a legally enforceable right of offset and the intention is to settle on a net basis. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-557": { "value": "Forward foreign exchange contracts \u2013 net investment hedges The group hedges part of the foreign exchange translation exposure on its net investment in certain overseas subsidiaries, using forward foreign exchange contracts. It recognises the portion of the gain or loss which is determined in the Consolidated Statement of Comprehensive Income, along with the gain or loss on translation of the foreign subsidiaries, and in a separate reserve within equity. Gains and losses accumulated in equity are included in the Consolidated Income Statement on disposal of the relevant hedged item. Other derivative contracts \u2013 held for trading The group uses certain derivative contracts which are effective hedges of economic exposures in accordance with the group\u2019s risk management policy, but for various reasons are not designated within a formal hedge accounting relationship. Therefore, these contracts must be designated as held for trading, and gains and losses on these contracts are recognised immediately in the Consolidated Income Statement. Fair values Fair values Assets 1 Liabilities 2 Assets1 Liabilities2, 3 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Shareholder derivatives: Interest rate contracts \u2013 held for trading 35,630 37,684 9,809 10,158 Interest rate contracts \u2013 cash flow hedges \u2013 \u2013 \u2013 105 Forward foreign exchange contracts \u2013 held for trading 49 44 34 15 Currency swap contracts \u2013 held for trading 1,103 3,004 463 627 Currency swap contracts \u2013 cash flow hedges 115 \u2013 \u2013 44 Inflation swap contracts \u2013 held for trading 4,964 5,092 2,861 2,778 Credit derivatives \u2013 held for trading \u2013 3 \u2013 23 Equity/index derivatives \u2013 held for trading 6 8 \u2013 \u2013 Other derivatives \u2013 held for trading 111 270 36 347 Total shareholder derivatives 41,978 46,105 13,203 14,097 Unit linked derivatives: Interest rate contracts \u2013 held for trading 48 255 584 732 Forward foreign exchange contracts \u2013 held for trading 798 1,344 1,851 570 Credit derivatives \u2013 held for trading 6 12 16 34 Inflation swap contracts \u2013 held for trading 2,423 3,271 955 156 Inflation rate contracts \u2013 held for trading \u2013 \u2013 1 \u2013 Equity/index derivatives \u2013 held for trading 144 174 70 75 Other derivatives \u2013 held for trading 30 29 112 54 Total unit linked derivatives 3,449 5,085 3,589 1,621 Total derivative assets and liabilities 45,427 51,190 16,792 15,718 1. Derivative assets are reported in the Consolidated Balance Sheet within Financial investments and investments property (Note 10). 2. Derivative liabilities are reported in the Consolidated Balance Sheet within Payables and other financial liabilities (Note 24). 3. For 2021, the amounts have been updated to reflect the correct analysis of swap contracts across the categories within Shareholder derivatives. There is no impact in respect of the total Payables and other financial liabilities reflected on the group\u2019s Consolidated Balance Sheet as at 31 December 2021. The group has entered into fixed rate borrowings denominated in USD and is therefore exposed to foreign exchange and interest rate risks. In order to hedge these risks the group has entered into cross currency interest rate swaps, enabling the exposure to be swapped into a fixed rate in its functional currency. These had an asset fair value totaling \u00a3115m (2021: \u00a344m liability fair value) and a notional amount of \u00a31,099m (2021: \u00a31,099m) at 31 December 2022. There was no ineffectiveness recognised in the income statement in respect of these hedges during 2022. 12 Derivative assets and liabilities continued The contractual undiscounted cash flows in relation to non-unit linked derivatives have the following maturity profile. Unit linked derivatives have not been included as shareholders are not directly exposed to liquidity risks. Maturity profile of undiscounted cash flows Fair Within Over values 1 year 1-5 years 5-15 years 15-25 years 25 years Total As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Cash inflows Shareholder derivatives Derivative assets 41,978 13,014 32,933 40,608 17,202 10,783 114,540 Derivative liabilities (46,105) 12,562 19,268 28,167 12,032 6,986 79,015 Total (4,127) 25,576 52,201 68,775 29,234 17,769 193,555 Cash outflows Shareholder derivatives Derivative assets 41,978 (9,050) (19,698) (25,866) (11,688) (8,073) (74,375) Derivative liabilities (46,105) (17,5 32) (35,466) (46,948) (18,626) (10,095) (128,667) Total (4,127) (26,582) (55,164) (72,814) (30,314) (18,168) (203,042) Net cash flows (1,006) (2,963) (4,039) (1,080) (399) (9,487) Maturity profile of undiscounted cash flows Fair Within Over values 1 year 1-5 years 5-15 years 15-25 years 25 years Total As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Cash inflows Shareholder derivatives Derivative assets 13,203 7,117 10,195 23,937 14,292 13,509 69,050 Derivative liabilities (14,097) 7, 24 3 9,662 25,002 12,898 11,199 66,004 Total (894) 14,360 19,857 48,939 27,190 24,708 135,054 Cash outflows Shareholder derivatives Derivative assets 13,203 (6,458) (8,293) (19,864) (11,135) (10,017) (55,767) Derivative liabilities (14,097) (8,261) (12,596) (30,235) (15,500) (13,291) (79,883) Total (894) (14,719) (20,889) (50,099) (26,635) (23,308) (135,650) Net cash flows (359) (1,032) (1,160) 555 1,400 (596) Future cash flows on the floating legs of interest rate and exchange derivatives are calculated using current spot rates, which may differ from the market expectation incorporated in the fair value. Cash flows arising from implied events covered by credit derivatives are presented in the tables above on an expected basis as cash flows within one year. Cash inflows or outflows are presented on a net basis where the group is required to settle net or has a legally enforceable right of offset and the intention is to settle on a net basis. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-558": { "value": "13 Receivables and other assets 2022 2021 Notes \u00a3m \u00a3m Reinsurance receivables 291 84 Receivables under finance leases 13(i) 192 169 Accrued interest and rent 550 378 Prepayments and accrued income 384 289 Insurance and intermediaries receivables 76 69 Inventories1 1,973 2,044 Contract assets2 188 322 Other receivables3 9,632 5,270 Total receivables and other assets 13,286 8,625 Due within 12 months 11,469 7,012 Due after 12 months 1,817 1,613 1. Inventories represent house building stock including land, options on land, work in progress and other inventory. 2. Contract assets represent the entity\u2019s right to consideration in exchange for goods or services that have been transferred to a customer. 3. Other receivables include amounts receivable from brokers and clients for investing activities, collateral pledges, unsettled cash, FX spots and other sundry balances. The group acts as a lessor of certain finance leases, which have a weighted average duration to maturity of 31 years as at 31 December 2022. The counterparties, as lessee, are regarded to be the economic owner of the leased assets. The future minimum lease payments under the arrangement, together with the present value, are disclosed below: Total Unearned Total Unearned future interest Present future interest Present payments income value payments income value 2022 2022 2022 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Within 1 year 12 (7) 5 10 (5) 5 1-2 years 12 (7) 5 11 (5) 6 2-3 years 12 (7) 5 10 (5) 5 3-4 years 12 (7) 5 10 (5) 5 4-5 years 12 (7) 5 10 (5) 5 After 5 years 266 (99) 167 200 (57) 143 Total 326 (134) 192 251 (82) 169 ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-559": { "value": "The group leases certain investment properties to third parties. Under these agreements, substantially all the risks and reward incidental to ownership are transferred to the lessee, and therefore the contracts have been classified as finance leases. At the lease commencement date, the group derecognises the investment property asset and recognises a receivable asset on its balance sheet to reflect the net investment in the lease, equal to the present value of the lease payments. The group recognises finance income over the lease term to reflect the rate of return on the net investment in the lease. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-560": { "value": "Cash and cash equivalents include cash in hand, deposits held at call with banks, treasury bills and other short-term highly liquid investments with maturities of three months or less from the date of acquisition. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-561": { "value": "Unit Shareholder linked Total 2022 2022 2022 \u00a3m \u00a3m \u00a3m Cash at bank and in hand 942 1,101 2,043 Cash equivalents 3,892 29,849 33,741 Total cash and cash equivalents 4,834 30,950 35,784 Unit Shareholder linked Total 2021 2021 2021 \u00a3m \u00a3m \u00a3m Cash at bank and in hand 1,115 2,702 3,817 Cash equivalents 2,481 10,189 12,670 Total cash and cash equivalents 3,596 12,891 16,487 ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-562": { "value": "17 Insurance risk The group is exposed to insurance risk as a consequence of offering the principal products outlined in Note 6. Insurance risk is the exposure to loss arising from insurance risk experience being different to that anticipated. Detailed below are the insurance risks associated with each of the group\u2019s segments along with the mitigating controls operated. They are applicable to all stated products across the group. Principal risks Division Controls to mitigate risks Longevity, mortality & morbidity risks For contracts providing death benefits, higher mortality rates would lead to an increase in claims costs. The cost of health related claims depends on both the incidence of policyholders becoming ill and the duration over which they remain ill. Higher than expected incidence or duration would increase costs over the level currently assumed in the calculation of liabilities. Retail The pricing of protection business is based on assumptions as to future trends in mortality and morbidity having regard to past experience. Underwriting criteria are defined setting out the risks that are unacceptable and the terms for non-standard risks presented by the lives to be insured. Extensive use of reinsurance is made within the UK retail protection business, placing a proportion of all risks meeting prescribed criteria. Mortality and morbidity experience is compared to that assumed within the pricing basis with variances subject to actuarial investigation. For annuity contracts, the group is exposed to the risk that mortality experience is lower than assumed. Lower than expected mortality would require payments to be made for longer and increase the cost of benefits provided. Lifetime mortgage business also explicitly has some exposure to the life expectancy of borrowers. LGRI and Retail Annuity business is priced having regard to trends in improvements in future mortality. Enhanced annuities, which are priced taking account of impairments to life expectancy, are subject to specific underwriting criteria. Certain annuitant mortality risks, including enhanced annuities, are placed with reinsurers. The group regularly reviews its mortality experience and industry projections of longevity and adjusts the pricing and valuation assumptions accordingly. In pricing lifetime mortgage business, account is taken of trends in mortality rates in setting the amounts that are advanced to borrowers relative to the value of the property on which the loan is secured. Persistency risk In the early years of a policy, lapses may result in a loss to the group, as the acquisition costs associated with the contract would not have been recovered from product margins. Retail The pricing and valuation assumptions for protection business include provision for policy lapses. Actual trends in policy lapse rates are monitored against these assumptions with variances being subject to actuarial investigation. Expense risk In pricing long-term insurance business, assumptions are made as to the future cost of product servicing. A significant adverse divergence in actual expenses experience could reduce product profitability. LGRI and Retail In determining pricing assumptions, account is taken of expected price and wage inflation, with stress testing used to evaluate the effect of significant deviations. Actual product servicing costs are monitored relative to the costs assumed with the product pricing basis, with variances investigated. Concentration (catastrophe) risk Insurance risk may be concentrated in geographic regions, altering the risk profile of the group. The most significant exposure of this type arises for group protection business, where a single event could result in a large number of related claims. Retail Group protection business contracts include an \u2018event limit\u2019 capping the total liability under the policy from a single event. Excess of loss reinsurance further mitigates loss from the exposure. Additionally, exposure by location is monitored to ensure there is a geographic spread of risk. Catastrophe reinsurance cover also mitigates loss from concentrations of risk. Epidemic (catastrophe) risk The spread of an epidemic could cause large aggregate claims across the group\u2019s portfolio of protection businesses. Retail The pricing basis for protection business includes an assessment of potential claims as a result of epidemic risks. Quota share and excess of loss reinsurance contracts are used by individual and group protection, respectively, to further mitigate the risk. Depending on the nature of an epidemic, mortality experience may lead to a reduction in the cost of claims for annuity business. Pricing for new business can also be updated to reflect the change in expected claims. Accumulation of risks There is limited potential for single incidents to give rise to a large number of claims across the different contract types written by the group. However, there are potentially material correlations of insurance risk with other types of risk exposure. The group\u2019s capital model seeks to measure risk correlations particularly those that would tend to be more acute as the underlying risk scenarios become more extreme. An example of the accumulation of risk is the correlation between reinsurer credit risk with mortality and morbidity exposures. Operational risk Operational risk is defined as loss arising from inadequate or failed internal processes, people, systems or external events. Potential for exposure to such risk extends to all of the group\u2019s businesses. The group has constructed a framework of internal controls to minimise material loss from operational risk events recognising that no system of internal control can completely eliminate the risk of error, financial loss, fraudulent action or reputational damage. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfInsuranceRisk", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-563": { "value": "18 Long-term insurance valuation assumptions The group\u2019s insurance assumptions, described below, relate to the UK insurance businesses and material lines of the US insurance business, Legal & General America (LGA). Other non-UK businesses do not constitute a material component of the group\u2019s operations and consideration of geographically determined assumptions is therefore not included. The group seeks to make prudent assumptions about future experience based on current market conditions and recent experience. Assumptions incorporate prudent margins in excess of our best estimate assumptions to reduce the possibility of actual experience being less favourable than assumed. (i) Mortality and morbidity Mortality and morbidity assumptions for the UK business are set with reference to standard tables drawn up by the Continuous Mortality Investigation (CMI), a subsidiary of the Institute and Faculty of Actuaries, and/or UK death registrations. US assumptions are set with reference to standard tables drawn up by the American Academy of Actuaries. Assumptions include an appropriate allowance for prudence. Tables are based on industry-wide mortality and morbidity experience for insured lives. The group conducts statistical investigations of its mortality and morbidity experience, the majority of which are carried out at least annually. Investigations determine the extent to which the group\u2019s experience differs from that underpinning the standard tables, and suggest appropriate adjustments which need to be made to the valuation assumptions. The higher mortality experience observed in 2020 as a result of Covid-19 is considered to be exceptional and, due to insufficient certainty in more recent data, long-term mortality assumptions have not taken this experience into account. In most cases, mortality rates are set separately for sex and smoker status, and the percentage of mortality table will vary for the first 2-5 years of the policy\u2019s duration to allow for underwriting selection. Mortality tables 2022 2021 Non-linked individual assurance business UK term assurances1 99%\u2013101% TM08/TF08 Sel 5 99%\u2013101% TM08/TF08 Sel 5 UK term assurances with terminal illness1 63%\u201395% TM08/TF08 Sel 5 63%\u201395% TM08/TF08 Sel 5 UK term assurances with critical illness2 109%\u2013159% ACL08 Sel 2 107%\u2013159% ACL08 Sel 2 US term assurances3 Adjusted SOA 2014 VBT Adjusted SOA 2014 VBT Whole of Life Protection Plan 4 Bespoke Tables based on TM08/TF08, PCMA00/PCFA00 and UK death registrations Bespoke Tables based on TM08/TF08, PCMA00/PCFA00 and UK death registrations Whole of Life over 504 Bespoke Tables based on ELT15 and Whole of Life Protection Plan assumptions Bespoke Tables based on ELT15 and Whole of Life Protection Plan assumptions Annuity business UK Annuities in deferment5 70.4%\u201380.5% PNMA00/PNFA00 70.9%\u201381.1% PNMA00/PNFA00 UK Vested annuities 6 Pension risk transfer 71.2%\u201380.5% PCMA00/PCFA00 71.6%\u201381.1% PCMA00/PCFA00 Other annuities 59.8%\u201395.4% PCMA00/PCFA00 59.3%\u201398.4% PCMA00/PCFA00 US annuities7 Bespoke tables based on RP\u20132014 Healthy Annuitant Total table Bespoke tables based on RP\u20132014 Healthy Annuitant Total table 1. Improvement assumptions applied of 0.6% p.a. for males and females (2021: 0.6% p.a. for males and females). 2. Morbidity rates are assumed to deteriorate at a rate of 0.50% p.a. for males and 0.75% p.a. for females (2021: 0.50% p.a. for males and 0.75% p.a. for females). 3. Adjustments are made for sex, select period, smoker status, policy size, policy duration and year, issue year and age. 4. Mortality rates are assumed to reduce based on CMI 2020 model with a long-term annual improvement rate of 1.5% for males and 1.0% for females (2021: Mortality rates are assumed to reduce based on CMI 2019 model with a long-term annual improvement rate of 1.5% for males and 1.0% for females). 5. Table created by blending PCXA00 with PNXA00 tables. The base table to be used for bulk purchase annuity policies in deferment is PNMA00 up to and including age 55 and PCMA00 for age 65 and above for males. The identical method is applied to females using PNFA00 and PCFA00. 6. Mortality rates are assumed to reduce according to an adjusted version of the mortality improvement model CMI 2020 (2021: CMI 2019) with the following parameters: Males: Long-term Rate of 1.50% p.a. up to age 85 tapering to 0% at 110 (2021: Long-term Rate of 1.50% p.a. up to age 85 tapering to 0% at 110). Females: Long-term Rate of 1.00% p.a. up to age 85 tapering to 0% at 110 (2021: Long-term Rate of 1.00% p.a. up to age 85 tapering to 0% at 110). Smoothing is applied to derive initial rates using a smoothing parameter (Sk) value of 7.5 applied to L&G bespoke population data up to 2020. The resulting initial rates are then adjusted to reflect socio economic class (2021: smoothing parameter (Sk) value of 7.5 applied to L&G bespoke population data to 2019). For individual annuities distributed through retail channels, a further allowance is made for the effect of initial selection. The basis above is applicable up to age 90. After age 90 the basis is blended towards a bespoke table from age 105 onwards. 7. Improvement table is MP2018 for Females and MP2019 for Males (2021: Improvement table is MP2018 for Females and MP2019 for Males). 18 Long-term insurance valuation assumptions continued (ii) Valuation rates of interest and discount rates The valuation interest rate used to discount the cash flows for the purpose of valuing insurance contract liabilities is based on the yield on the assets backing the contract. For annuity business, an explicit allowance for risk is deducted from the yield. The allowance for risk comprises long-term assumptions about defaults on a prudent basis or, in the case of lifetime mortgage assets, a prudent expectation of losses arising from the No Negative Equity Guarantee. These allowances vary by asset category and for some asset classes by rating. The allowance for risk for government backed bonds equated to 9bps (2021: 9bps) and 42bps for corporate bonds and direct investments (2021: 43bps). This is equivalent to a default provision of \u00a32.2bn at 31 December 2022 (2021: \u00a33.4bn). For lifetime mortgage business, the allowance for risk in respect of lifetime mortgage assets is equivalent to \u00a30.4bn at 31 December 2022 (2021: \u00a30.6bn). For UK assurance business, different rates apply depending on whether the liabilities are positive or negative. An appropriate valuation interest rate is applied at all times during the projection, i.e. when liabilities switch from being negative to positive the valuation interest rate will also switch from being high to low. The crossover point at which the margin changes direction is assessed for broad product groups but applied at a policy by policy level. For US assurance business, the valuation interest rate is derived by combining the risk free yield curve (based on US Treasuries) plus a risk adjusted spread addition based on the portfolio of assets LGA invest in. It includes prudent adjustments for default and reinvestment risk. Rate of interest/discount rates 2022 2021 UK Life assurances 4.23%\u20135.09% p.a. 1.40%\u20132.52% p.a. UK Pension assurances 4.23%\u20135.09% p.a. 1.40%\u20132.52% p.a. US Life assurances 2.78%\u20136.65% p.a. 1.20%\u20133.80% p.a. UK Annuities \u2013 Fixed 4.94% p.a. 1.78% p.a. UK Annuities \u2013 Index Linked 1.20% p.a. (1.88%) p.a. US Annuities 5.29% p.a. 2.62% p.a. (iii) Persistency The group monitors its persistency experience and carries out detailed investigations annually. Persistency experience can be volatile and past experience may not be an appropriate future indicator. The group tries to balance past experience and potential future conditions by making prudent assumptions about expected long-term average persistency levels. Where explicit persistency assumptions are not made, prudence is also incorporated into the liabilities by ensuring that they are sufficient to cover the more onerous of the two scenarios where the policies either remain in-force until maturity or where they discontinue at the valuation date. For UK term assurance business, the margin acts to increase the best estimate lapse rate in the early part of a policy\u2019s lifetime (when it is treated as an asset) but to reduce the best estimate lapse rate later in the policy\u2019s lifetime (when it is treated as a liability). The crossover point at which the margin changes direction is assessed for broad product groups but applied at a policy by policy level. Any liability to reinsurers on discontinuance within the first four years from inception is allowed for explicitly in the cash flows, using the valuation lapse basis, together with a prudent allowance for clawback of commission from agents upon lapse. For US term assurance, a single margin is used across guaranteed period durations for a given policy. All US term assurance contracts are assumed to lapse at the end of the guaranteed period. Policies past the guaranteed period as of the valuation date are assumed to lapse on the next premium due date. Lapse rates 2022 2021 UK Level term 1.6%\u201335.0% 1.6%\u201334.5% UK Decreasing term 5.3%\u201318.0% 5.3%\u201318.0% UK Accelerated critical illness cover 2.6%\u201337.8% 2.6%\u201337. 3% Pensions term 2.3%\u20133.5% 2.3%\u20133.8% Whole of Life (conventional non profit) 0.4%\u20136.0% 0.5%\u20136.1% US term \u2013 10 year guarantee period 5.7%\u20136.5% 5.7%\u20136.5% US term \u2013 15 year guarantee period 3.4%\u20134.6% 3.4%\u20134.6% US term \u2013 20 year guarantee period 2.4%\u20134.9% 2.4%\u20134.9% US term \u2013 30 year guarantee period 1.7%\u20135.2% 1.7%\u20135.2% US Universal Life 1.9% 1.9% (iv) Expenses The group monitors its expense experience and carries out detailed investigations regularly to determine the expenses incurred in writing and administering the different products and classes of business. Adjustments may be made for known future changes in the administration processes, in line with the group\u2019s business plan, as well as for changes in allocations. An allowance for expense inflation in the future is also made in line with RPI, taking account of both salary and price information. The expense assumptions and expense inflation assumption include an appropriate allowance for prudence. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfLongTermInsuranceValuationAssumptions", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-564": { "value": "19 IFRS sensitivity analysis Impact on Impact on pre-tax Impact on pre-tax Impact on group profit group equity group profit group equity net of net of net of net of reinsurance reinsurance reinsurance reinsurance 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Economic sensitivity 100bps increase in interest rates (98) (66) 55 188 100bps decrease in interest rates 44 16 (195) (317) 50bps increase in future inflation expectations (45) (33) (41) (60) 50bps decrease in future inflation expectations 82 65 39 58 Credit spreads widen by 100bps with no change in expected defaults (345) (352) (311) (234) 25% rise in equity markets 381 316 513 423 25% fall in equity markets (381) (316) (513) (423) 15% rise in property values 1,177 974 1,299 1,084 15% fall in property values (1,233) (1,022) (1,368) (1,144) 10bps increase in credit default assumptions (545) (465) (765) (651) 10bps decrease in credit default assumptions 546 465 754 642 Non-economic sensitivity 1% increase in annuitant mortality 141 122 166 146 1% decrease in annuitant mortality (139) (121) (170) (150) 5% increase in assurance mortality (398) (315) (451) (357) 10% increase in maintenance expenses (224) (185) (254) (208) The table above shows the impacts on group pre-tax profit and equity, net of reinsurance, under each sensitivity scenario. The group pre-tax profit and equity impacts may arise from asset and/or liability movements under the sensitivities. The current disclosure reflects management\u2019s view of key risks in current economic conditions. In calculating the alternative values, all other assumptions are left unchanged. In practice, impacts of the group\u2019s experience may be correlated. The sensitivity analyses do not take into account management actions that could be taken to reduce the impacts. The group seeks to actively manage its asset and liability position. A change in market conditions may lead to changes in the asset allocation or charging structure which may have a more, or less, significant impact on the value of the liabilities. The analysis also ignores any second order effects of the assumption change, including the potential impact on the group asset and liability position and any second order tax effects. The sensitivity of profit to changes in assumptions may not be linear. They should not be extrapolated to changes of a much larger order. The change in interest rate stresses assume a 100 basis point increase/decrease in the gross redemption yield on fixed interest securities together with the same change in the real yields on variable securities. Valuation interest rates are assumed to move in line with market yields, adjusted to allow for prudence calculated in a manner consistent with the base results. The inflation stresses adopted are a 0.5% per annum (p.a.) increase/decrease in inflation, resulting in a 0.5% p.a. reduction/rise in real yield and no change to the nominal yield. In addition, the expense inflation rate is increased/decreased by 0.5% p.a. In the sensitivity for credit spreads, corporate bond yields have increased by 100bps, gilt and approved security yields unchanged, and there has been no adjustment to the default assumptions. All lifetime mortgages are excluded, as their primary exposure is to property risk, and therefore captured under the property stress. The equity stresses are a 25% rise and 25% fall in listed equity market values. The property stresses adopted are a 15% rise and 15% fall in property market values including lifetime mortgages. Rental income is assumed to be unchanged. Where property is being used to back liabilities, valuation interest rates move with property yields, and so the value of the liabilities will also move. The credit default assumption is set based on the credit rating of individual bonds and their outstanding term using Moody\u2019s global credit default rates. The credit default stress assumes a +/-10bps stress to the current unapproved credit default assumption, which will have an impact on the valuation interest rates used to discount liabilities. Other credit default allowances are unchanged. All lifetime mortgages are excluded, as their primary exposure is to property risk, and therefore captured under the property stress. The annuitant mortality stresses are a 1% increase and 1% decrease in the mortality rates for immediate and deferred annuitants with no change to the mortality improvement rates. 19 IFRS sensitivity analysis continued The assurance mortality stress is a 5% increase in the mortality and morbidity rates with no change to the mortality and morbidity improvement rates. The maintenance expense stress is a 10% increase in all types of maintenance expenses in future years. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfIFRSSensitivityAnalysis", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-565": { "value": "Insurance contracts are contracts which transfer significant insurance risk to the insurer at the inception of the contract. This is the case if, and only if, an insured event could cause an insurer to make significant additional payments in any scenario, other than a scenario which lacks commercial substance. Such contracts remain insurance contracts until all rights and obligations are extinguished or expire. Contracts can be reclassified as insurance contracts after inception if insurance risk becomes significant. Any contracts not considered to be insurance contracts under IFRS are classified as investment contracts. Long-term insurance Death claims are accounted for on notification of death. Surrenders for non-linked policies are accounted for when payment is made. Critical illness claims are accounted for when admitted. All other long-term claims and surrenders are accounted for when payment is due. Claims payable include the direct costs of settlement. The change in the insurance liability reflects the reduction in liabilities as claims are paid throughout the year, offset by liabilities arising from new business. The movement also reflects changes in expectations of future claims payments and expenses, plus changes in valuation interest rates, as set out in Note 18. Under current IFRS requirements, insurance contract liabilities are measured using local Generally Accepted Accounting Principles (GAAP), as permitted by IFRS 4, \u2018Insurance Contracts\u2019. For non-participating insurance contracts, the liabilities are calculated on the basis of current information using the gross premium valuation method. This brings into account the full premiums receivable under contracts written, having prudent regard to expected lapses and surrenders, estimated renewal and maintenance costs, and contractually guaranteed benefits. For unit linked insurance contract liabilities the provision is based on the fund value together with an allowance for any excess of future expenses over charges where appropriate. Reinsurance The group\u2019s insurance subsidiaries cede insurance premiums and risk in the normal course of business in order to limit the potential for losses and to provide financing. Outwards reinsurance premiums are accounted for in the same accounting period as the related premiums for the direct or inwards reinsurance business being reinsured. Reinsurance assets include balances due from reinsurers for paid and unpaid losses and loss adjustment expenses, ceded unearned premiums and ceded future life policy benefits. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. An impairment occurs when there is objective evidence, as a result of an event that occurred after initial recognition of the reinsurance asset, that the group may not receive all outstanding amounts due, and the event has a reliably measurable impact on the amounts that it will receive from the reinsurer. If a reinsurance asset is impaired, the group reduces its carrying amount accordingly and recognises that impairment loss in the Consolidated Income Statement. Reinsurance is recorded as an asset in the Consolidated Balance Sheet unless a right of offset exists, in which case the associated liabilities are reduced commensurately. Contracts with reinsurers are assessed to determine whether they contain significant insurance risk. Contracts that do not give rise to significant transfer of insurance risk to the reinsurer are considered to be financial reinsurance and are accounted for and disclosed in a manner consistent with financial instruments. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInsuranceContracts", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-566": { "value": "(i) Analysis of non-participating insurance contract liabilities Gross Reinsurance Gross Reinsurance 2022 2022 2021 2021 Note \u00a3m \u00a3m \u00a3m \u00a3m Non-participating insurance contracts 20(iii) 70,275 (6,897) 89,755 (7,138) General insurance contracts 62 (58) 70 (42) Insurance contract liabilities 70,337 (6,955) 89,825 (7,180) (ii) Expected non-participating insurance contract liability cash flows Undiscounted cash flows 0-5 5-15 15-25 Over 25 years years years years Total As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Non-participating insurance contract liabilities 20,386 41,482 27,0 04 23,941 112,813 Undiscounted cash flows 0-5 5-15 15-25 Over 25 years years years years Total As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Non-participating insurance contract liabilities 18,603 35,185 23,439 22,039 99,266 Non-participating insurance contract undiscounted cash flows are based on the expected date of settlement. (iii) Movement in non-participating insurance contract liabilities Gross Reinsurance1 Gross Reinsurance 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m As at 1 January 89,755 (7,138) 88,958 (6,936) New liabilities in the year 9,051 (1,730) 6,976 (1,296) Liabilities discharged in the year (5,311) (233) (4,74 4) 390 Unwinding of discount rates 1,812 (256) 1,250 (141) Effect of change in non-economic assumptions (1,022) 578 (787) 408 Effect of change in economic assumptions (24,891) 2,033 (1,971) 519 Foreign exchange adjustments 829 (181) (35) (12) Modelling and methodology changes 36 26 37 6 Other 16 4 71 (76) Total as at 31 December 70,275 (6,897) 89,755 ( 7,13 8) Expected to be settled within 12 months (net of reinsurance) 2,356 1,838 Expected to be settled after 12 months (net of reinsurance) 61,022 80,779 1. Liabilities discharged in the year include movement arising from the reinsurance of the in-force universal life book in the US protection business. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInsuranceContractsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-567": { "value": "Non-participating investment contract liabilities are measured at fair value. For unit linked liabilities, fair value is determined by reference to the value of the underlying net asset values of the group\u2019s unitised investment funds at the balance sheet date. For non-linked liabilities, fair value is based on a discounted cash flow analysis which incorporates an appropriate allowance for credit default risk. Deposits collected and claims are not included in the income statement but are added or deducted from investment contract liabilities. ", "dimensions": { "concept": "legalandgeneral:DescriptionOfAccountingPolicyForInvestmentContractLiabilities", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-568": { "value": "(i) Analysis of non-participating investment contract liabilities Gross Reinsurance Gross Reinsurance 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Non-participating investment contract liabilities 286,830 \u2013 372,954 \u2013 Expected to be settled within 12 months (net of reinsurance) 31,649 45,483 Expected to be settled after 12 months (net of reinsurance) 255,181 327,471 Amounts under unit linked contracts are generally repayable on demand and the group is responsible for ensuring there is sufficient liquidity within the asset portfolio to enable liabilities to unit linked policyholders to be met as they fall due. However, the terms of funds investing in less liquid assets permit the deferral of redemptions for predefined periods in circumstances where there are not sufficient liquid assets within the fund to meet the level of requested redemptions. Non-participating investment contract liabilities include \u00a3901m (2021: \u00a31,413m) of Assured Payment Policies (APP) products, which are classified as Level 2 in the fair value hierarchy. The valuation of APP products is determined through a discounted cash flows model, where the discount rate is derived from a risk-free rate, a credit benchmark spread and a zero-volatility spread (Z-spread). The credit benchmark rate used is the A-rated credit spread curve which reflects the strategic portfolio mix. The Z-spread ensures that the fair value at inception is equal to the transaction price, therefore it is based on the premium on origination and remains constant over the life of the policy. The presented fair values of the remaining non-participating investment contract liabilities reflect quoted prices in active markets and they have been classified as Level 1 in the fair value hierarchy. During the year there have been no transfers of non-participating investment contract liabilities between levels of the fair value hierarchy (2021: no significant transfers between levels of the fair value hierarchy). (ii) Movement in non-participating investment contract liabilities Gross Reinsurance Gross Reinsurance 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m As at 1 January 372,954 \u2013 343,543 (3) Reserves in respect of new business 54,355 \u2013 55,434 \u2013 Amounts paid on surrenders and maturities during the year (60,338) \u2013 (60,132) 3 Investment return (80,043) \u2013 34,206 \u2013 Management charges (98) \u2013 (97) \u2013 Total as at 31 December 286,830 \u2013 372,954 \u2013 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentContractsLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-569": { "value": "Borrowings are recognised initially at fair value, net of transaction costs. Borrowings are subsequently stated at amortised cost. The difference between the net proceeds and the redemption value is recognised in the income statement over the borrowing period using the effective interest rate method. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-570": { "value": "Borrowings comprise core borrowings such as subordinated Tier 2 bond issues, long-term unsecured senior debt and operational borrowings such as commercial paper issuance and bank borrowings under both committed and uncommitted debt facilities, including bank overdrafts. Borrowings secured on specific assets/cash flows are included as non-recourse borrowings. (i) Analysis by type Borrowings Borrowings excluding excluding unit Unit unit Unit linked linked linked linked borrowings borrowings Total borrowings borrowings Total 2022 2022 2022 2021 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Core borrowings 4,338 \u2013 4,338 4,256 \u2013 4,256 Operational borrowings 963 256 1,219 924 8 932 Total borrowings 5,301 256 5,557 5,180 8 5,188 \u00a3214m of interest expense was incurred during the year (2021: \u00a3229m) on borrowings excluding non-recourse and unit linked borrowings. The total finance costs incurred in the year were \u00a3290m (2021: \u00a3294m), which also includes \u00a38m of finance costs on lease liabilities (2021: \u00a310m). (ii) Analysis by nature (a) Core borrowing Carrying Coupon Carrying Coupon amount rate Fair value amount rate Fair value 2022 2022 2022 2021 2021 2021 \u00a3m % \u00a3m \u00a3m % \u00a3m Subordinated borrowings 5.5% Sterling subordinated notes 2064 (Tier 2) 590 5.50 541 590 5.50 776 5.375% Sterling subordinated notes 2045 (Tier 2) 605 5.38 593 604 5.38 673 5.25% US Dollar subordinated notes 2047 (Tier 2) 712 5.25 665 635 5.25 694 5.55% US Dollar subordinated notes 2052 (Tier 2) 417 5.55 389 373 5.55 428 5.125% Sterling subordinated notes 2048 (Tier 2) 400 5.13 377 400 5.13 461 3.75% Sterling subordinated notes 2049 (Tier 2) 599 3.75 507 598 3.75 632 4.5% Sterling subordinated notes 2050 (Tier 2) 500 4.50 439 500 4.50 558 Client fund holdings of group debt (Tier 2)1 (74) \u2013 (67) (44) \u2013 (51) Total subordinated borrowings 3,749 \u2013 3,444 3,656 \u2013 4,171 Senior borrowings Sterling medium term notes 2031-2041 609 5.87 649 609 5.87 846 Client fund holdings of group debt1 (20) \u2013 (19) (9) \u2013 (11) Total senior borrowings 589 \u2013 630 600 \u2013 835 Total core borrowings 4,338 \u2013 4,074 4,256 \u2013 5,006 1. \u00a394m (31 December 2021: \u00a353m) of the group\u2019s subordinated and senior borrowings are held by Legal & General customers through unit linked products. These borrowings are shown as a deduction from total core borrowings in the table above. The presented fair values of the group\u2019s core borrowings reflect quoted prices in active markets and they have been classified as Level 1 in the fair value hierarchy. 22 Borrowings continued (ii) Analysis by nature continued (a) Core borrowing continued Subordinated borrowings 5.5% Sterling subordinated notes 2064 In 2014, Legal & General Group Plc issued \u00a3600m of 5.5% dated subordinated notes. The notes are callable at par on 27 June 2044 and every five years thereafter. If not called, the coupon from 27 June 2044 will be reset to the prevailing five year benchmark gilt yield plus 3.17% p.a. These notes mature on 27 June 2064. 5.375% Sterling subordinated notes 2045 In 2015, Legal & General Group Plc issued \u00a3600m of 5.375% dated subordinated notes. The notes are callable at par on 27 October 2025 and every five years thereafter. If not called, the coupon from 27 October 2025 will be reset to the prevailing five year benchmark gilt yield plus 4.58% p.a. These notes mature on 27 October 2045. 5.25% US Dollar subordinated notes 2047 On 21 March 2017, Legal & General Group Plc issued $850m of 5.25% dated subordinated notes. The notes are callable at par on 21 March 2027 and every five years thereafter. If not called, the coupon from 21 March 2027 will be reset to the prevailing US Dollar mid-swap rate plus 3.687% p.a. These notes mature on 21 March 2047. 5.55% US Dollar subordinated notes 2052 On 24 April 2017, Legal & General Group Plc issued $500m of 5.55% dated subordinated notes. The notes are callable at par on 24 April 2032 and every five years thereafter. If not called, the coupon from 24 April 2032 will be reset to the prevailing US Dollar mid-swap rate plus 4.19% p.a. These notes mature on 24 April 2052. 5.125% Sterling subordinated notes 2048 On 14 November 2018, Legal & General Group Plc issued \u00a3400m of 5.125% dated subordinated notes. The notes are callable at par on 14 November 2028 and every five years thereafter. If not called, the coupon from 14 November 2028 will be reset to the prevailing five year benchmark gilt yield plus 4.65% p.a. These notes mature on 14 November 2048. 3.75% Sterling subordinated notes 2049 On 26 November 2019, Legal & General Group Plc issued \u00a3600m of 3.75% dated subordinated notes. The notes are callable at par on 26 November 2029 and every five years thereafter. If not called, the coupon from 26 November 2029 will be reset to the prevailing five year benchmark gilt yield plus 4.05% p.a. These notes mature on 26 November 2049. 4.5% Sterling subordinated notes 2050 On 1 May 2020, Legal & General Group Plc issued \u00a3500m of 4.5% dated subordinated notes. The notes are callable at par on 1 November 2030 and every five years thereafter. If not called, the coupon from 1 November 2030 will be reset to the prevailing five year benchmark gilt yield plus 5.25% p.a. These notes mature on 1 November 2050. All of the above subordinated notes are treated as Tier 2 own funds for Solvency II purposes unless stated otherwise. Senior borrowings Between 2000 and 2002 Legal & General Finance Plc issued \u00a3600m of senior unsecured Sterling medium term notes 2031-2041 at coupons between 5.75% and 5.875%. These notes have various maturity dates between 2031 and 2041. (b) Operational borrowings Carrying Interest Carrying Interest amount rate Fair value amount rate Fair value 2022 2022 2022 2021 2021 2021 \u00a3m % \u00a3m \u00a3m % \u00a3m Short-term operational borrowings Euro Commercial Paper 50 1.60 50 50 0.16 50 Bank loans and overdrafts 3 \u2013 3 \u2013 \u2013 \u2013 Non-recourse borrowings Cardiff Interchange Limited credit facility 64 5.63 64 45 2.29 45 CALA revolving credit facility 24 5.50 24 100 1.96 100 Class B Surplus Notes 788 6.62 788 664 1.72 664 Affordable Homes revolving credit facility 19 4.38 19 56 2.08 56 Homes Modular revolving credit facility 15 6.62 15 9 3.27 9 Operational borrowings1 963 \u2013 963 924 \u2013 924 1. Unit linked borrowings with a carrying value of \u00a3256m (31 December 2021: \u00a38m) are excluded from the analysis above as the risk is retained by policyholders. Operational borrowings including unit linked borrowings are \u00a31,219m (31 December 2021: \u00a3932m). Non-recourse borrowings \u2022 Cardiff Interchange Limited\u2019s credit facility is secured on the assets of Cardiff Interchange Limited and Legal & General Capital Investments Limited\u2019s (LGCIL) shares in, and intercompany debt owed by, Cardiff Interchange Limited. \u2022 CALA Group (Holdings) Limited\u2019s revolving credit facility is secured by way of a bond and floating charge, and guarantees and fixed charges granted by CALA Group Limited and its main subsidiaries (CALA 1999 Limited, CALA Limited, and CALA Management Limited). A number of other bonds and floating charges, fixed securities, debentures and share pledges over land and assets have been granted by certain subsidiaries of CALA Group Limited in favour of the lenders. \u2022 The Class B Surplus Notes have been issued by a US subsidiary of the group as part of a coinsurance structure for the purpose of US statutory regulations. The notes were issued in exchange for bonds of the same value from an unrelated party, included within financial investments on the group\u2019s Consolidated Balance Sheet. \u2022 The revolving credit facilities to Affordable Homes is subject to agreed covenants, the breach of which could result in a charge on the land and work in progress of Legal & General Affordable Homes (Development 2) Limited and Legal & General Affordable Homes (Development 3) Limited. \u2022 Legal & General Homes Modular Limited\u2019s revolving credit facility is secured by way of fixed charges over development properties owned by the company and a fixed charge over the shares in the company. The carrying value of operational borrowings approximates their fair value. The presented fair values reflect observable market information and have been classified as Level 2 in the fair value hierarchy with the exception of the Affordable Homes revolving credit facility which has been classified as Level 3. 22 Borrowings continued (iii) Analysis by maturity Maturity profile of undiscounted cash flows Carrying Within 1-5 5-15 15-25 Over amount 1 year years years years 25 years Total As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Subordinated borrowings 5.5% Sterling subordinated notes 2064 (Tier 2) 590 \u2013 \u2013 \u2013 \u2013 (600) (600) 5.375% Sterling subordinated notes 2045 (Tier 2) 605 (6) \u2013 \u2013 (600) \u2013 (606) 5.25% US Dollar subordinated notes 2047 (Tier 2) 712 (10) \u2013 \u2013 (704) \u2013 (714) 5.55% US Dollar subordinated notes 2052 (Tier 2) 417 (4) \u2013 \u2013 \u2013 (414) (418) 5.125% Sterling subordinated notes 2048 (Tier 2) 400 (3) \u2013 \u2013 \u2013 (400) (403) 3.75% Sterling subordinated notes 2049 (Tier 2) 599 (2) \u2013 \u2013 \u2013 (600) (602) 4.5% Sterling subordinated notes 2050 (Tier 2) 500 (4) \u2013 \u2013 \u2013 (500) (504) Client fund holdings of group debt (Tier 2) (74) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Senior borrowings Sterling medium term notes 2031-2041 609 (11) \u2013 (590) (10) \u2013 (611) Client fund holdings of group debt (20) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Total core borrowings 4,338 (40) \u2013 (590) (1,314) (2,514) (4,458) Short-term operational borrowings Euro Commercial Paper 50 (50) \u2013 \u2013 \u2013 \u2013 (50) Bank loans and overdrafts 3 (3) \u2013 \u2013 \u2013 \u2013 (3) Non-recourse borrowings Cardiff Interchange Limited credit facility 64 (64) \u2013 \u2013 \u2013 \u2013 (64) CALA revolving credit facility 24 \u2013 (24) \u2013 \u2013 \u2013 (24) Class B Surplus Notes 788 \u2013 (47) (422) (319) \u2013 (788) Affordable Homes revolving credit facility 19 (19) \u2013 \u2013 \u2013 \u2013 (19) Homes Modular revolving credit facility 15 (1) (14) \u2013 \u2013 \u2013 (15) Total operational borrowings 963 (137) (85) (422) (319) \u2013 (963) Total borrowings excluding unit linked borrowings1 5,301 (177) (85) (1,012) (1,633) (2,514) (5,421) Contractual undiscounted interest payments (291) (1,150) (2,569) (1,896) (781) (6,687) Total contractual undiscounted cash flows (468) (1,235) (3,581) (3,529) (3,295) (12,108) 1. Unit linked borrowings are excluded from the analysis above as the risk is retained by policyholders. Maturity profile of undiscounted cash flows Carrying Within 1-5 5-15 15-25 Over amount 1 year years years years 25 years Total As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Subordinated borrowings 5.5% Sterling subordinated notes 2064 (Tier 2) 590 \u2013 \u2013 \u2013 \u2013 (600) (600) 5.375% Sterling subordinated notes 2045 (Tier 2) 604 (6) \u2013 \u2013 (600) \u2013 (606) 5.25% US Dollar subordinated notes 2047 (Tier 2) 635 (9) \u2013 \u2013 \u2013 (628) (637) 5.55% US Dollar subordinated notes 2052 (Tier 2) 373 (4) \u2013 \u2013 \u2013 (370) (374) 5.125% Sterling subordinated notes 2048 (Tier 2) 400 (3) \u2013 \u2013 \u2013 (400) (403) 3.75% Sterling subordinated notes 2049 (Tier 2) 598 (2) \u2013 \u2013 \u2013 (600) (602) 4.5% Sterling subordinated notes 2050 (Tier 2) 500 (4) \u2013 \u2013 \u2013 (500) (504) Client fund holdings of group debt (Tier 2) (44) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Senior borrowings Sterling medium term notes 2031-2041 609 (11) \u2013 (590) (10) \u2013 (611) Client fund holdings of group debt (9) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Total core borrowings 4,256 (39) \u2013 (590) (610) (3,098) (4,337) Short-term operational borrowings Euro Commercial Paper 50 (50) \u2013 \u2013 \u2013 \u2013 (50) Bank loans and overdrafts \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Non-recourse borrowings Cardiff Interchange Limited credit facility 45 \u2013 (45) \u2013 \u2013 \u2013 (45) CALA revolving credit facility 100 (6) (94) \u2013 \u2013 \u2013 (100) Class B Surplus Notes 664 \u2013 \u2013 (468) (198) \u2013 (666) Affordable Homes revolving credit facility 56 (56) \u2013 \u2013 \u2013 \u2013 (56) Homes Modular revolving credit facility 9 \u2013 (9) \u2013 \u2013 \u2013 (9) Total operational borrowings 924 (112) (148) (468) (198) \u2013 (926) Total borrowings excluding unit linked borrowings1 5,180 (151) (148) (1,058) (808) (3,098) (5,263) Contractual undiscounted interest payments (202) (924) (2,132) (1,840) (889) (5,987) Total contractual undiscounted cash flows (353) (1,072) (3,190) (2,648) (3,987) (11,250) 1. Unit linked borrowings are excluded from the analysis above as the risk is retained by policyholders. The maturity profile above is calculated on the basis that a facility to refinance a maturing loan is not recognised unless the facility and loan are related. If refinancing under the group\u2019s credit facilities was recognised, then all amounts shown as repayable within one year would be reclassified as repayable between one and five years. Undiscounted interest payments are estimated based on the year end applicable interest rate and spot exchange rates. Syndicated credit facility As at 31 December 2022, the group had in place a \u00a31.5bn (31 December 2021: \u00a31.0bn) syndicated committed revolving credit facility provided by a number of its key relationship banks, maturing in August 2027. No amounts were outstanding at 31 December 2022. 22 Borrowings continued (iv) Movement in borrowings 2022 2021 \u00a3m \u00a3m As at 1 January 5,188 5,613 Cash movements: \u2013 Proceeds from borrowings 691 503 \u2013 Repayment of borrowings (737) (798) \u2013 Net increase/(decrease) in bank loans and overdrafts 254 (54) Non-cash movements: \u2013 Amortisation 2 3 \u2013 Foreign exchange rate movements 201 10 \u2013 Other (42) (89) Core and operational borrowings as at 31 December 5,557 5,188 ", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-571": { "value": "Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Where the group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The group recognises a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract. The group operates a number of defined benefit and defined contribution pension schemes in the UK and overseas. The assets of all UK defined benefit schemes are held in separate trustee administered funds which are subject to regular actuarial valuations every three years, updated by formal reviews at reporting dates. The actuarial assumptions used in the triennial valuation would normally be consistent or more prudent than those used for the purposes of IAS 19, \u2018Employee Benefits\u2019 reporting. The liability recognised in the Consolidated Balance Sheet in respect of the defined benefit pension schemes is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, provided any surplus in the Fund and Scheme is not restricted. Plan assets exclude the insurance contracts issued by the group. The defined benefit obligation is calculated actuarially each year using the projected unit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows. The discount rate is based on market yields of high quality corporate bonds which are denominated in the currency in which the benefits will be paid, and that have terms to maturity which approximate to those of the related pension liability. The group pays contractual contributions in respect of defined contribution schemes. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-572": { "value": "(i) Analysis of provisions 2022 2021 Notes \u00a3m \u00a3m Other provisions 23(ii) 273 213 Retirement benefit obligations 23(iii) 617 1,025 Total provisions 890 1,238 (ii) Other provisions Included within Other provisions are amounts relating to new and existing M&A and restructuring transactions. These include costs that Legal & General Investment Management (LGIM) is committed to incur on the extension of its existing partnership with State Street announced in 2021, to increase the use of Charles River technology across the front office and to deliver middle office services going forward. Costs include the transfer of data and operations to State Street, as well as the implementation of the new operating model. The amounts included in the provision have been determined on a best estimate basis by reference to a range of plausible scenarios, taking into account the multi-year implementation period for the project. As at 31 December 2022, the outstanding provision was \u00a3111m (31 December 2021: \u00a389m). (iii) Retirement benefit obligations Defined contribution schemes The group operates the following principal defined contribution pension schemes in the UK and overseas: \u2022 Legal & General Group Personal Pension Plan (UK); \u2022 Legal & General Staff Stakeholder Pension Scheme (UK); \u2022 Legal & General America Inc. Savings Plan (US); and \u2022 CALA defined contribution pension scheme. Contributions of \u00a393m (2021: \u00a382m) were made during the year in respect of defined contribution schemes. Defined benefit schemes The group operates the following defined benefit pension schemes in the UK and overseas: \u2022 Legal & General Group UK Pension and Assurance Fund (the Fund). The Fund was closed to new members from January 1995; the latest triennial valuation as at 31 December 2021 was completed on 21 September 2022; \u2022 Legal & General Group UK Senior Pension Scheme (the Scheme). The Scheme was, with a few exceptions (principally transfers from the Fund), closed to new members from August 2000 and finally closed to new members from April 2007; the latest triennial valuation as at 31 December 2021 was completed on 21 September 2022; \u2022 Legal & General America Inc. Cash Balance Plan (US). The last full actuarial valuation was as at 31 December 2022; and \u2022 CALA Retirement and Death Benefits Scheme (UK). This scheme closed to new members from 31 December 2007 and closed to future accrual on 31 December 2018; the last triennial actuarial valuation was as at 6 April 2021. The UK defined benefit schemes operate within the UK pensions\u2019 regulatory framework. Certain of the following disclosures have only been presented in relation to the Fund and Scheme, as they represent the most significant defined benefit scheme obligations. The UK Fund and Scheme were closed to future accrual on 31 December 2015. As part of this arrangement, payments to the Fund and Scheme in respect of future accruals ceased from this date and were replaced with a company contribution payment of between 5% and 15% into a defined contribution arrangement. The assets of all UK defined benefit schemes are held in separate trustee administered funds to meet long-term pension obligations to past and present employees. Trustees are appointed to the schemes and have a responsibility to act in the best interest of the scheme beneficiaries. The trustees\u2019 long-term objectives are to minimise the risk that there are insufficient assets to meet the liabilities of the scheme over the longer term, control the on-going operational costs of the schemes and to maximise investment returns for the beneficiaries within an acceptable level of risk. The total number of members of the Fund and Scheme was: 2022 2021 Employed deferreds 73 79 Deferreds 2,557 2,782 Pensioners 3,911 3,791 Total 6,541 6,652 The group works closely with the trustees to develop an investment strategy for each UK scheme in order to meet the long-term objectives of the trustees as noted above. 23 Provisions continued (iii) Retirement benefit obligations continued Defined benefit schemes continued Certain parts of the liabilities of the Fund and Scheme are secured by way of annuities purchased from the group. These annuities are not recognised as an asset for IAS 19 purposes, but at 31 December 2022 the value of these annuities, on an IAS 19 basis, was \u00a3718m (2021: \u00a3990m). The remainder of the liabilities of the Fund and Scheme are secured by cash or by the way of Assured Payment Policies (APPs), purchased from the group to match the majority of future expected cash flows of the remaining members of the Fund and Scheme. The APPs are recognised as an asset for IAS 19 purposes, and their value is included in the table summarising the plan assets. The APPs aim to match the changes in the value of the liabilities due to changes in economic factors, namely interest rates, credit spreads and inflation. The APPs do not aim to match changes in the value of liabilities due to the actual mortality experience of members being different from the assumptions made in the valuation basis. The Fund and Scheme expose the group to a number of risks: Risk Detail Uncertainty in benefit payments The value of the group\u2019s liabilities for post-retirement benefits will ultimately depend on the amount of benefits paid out. This in turn will primarily depend on the level of inflation and how long individuals live. Volatility in asset values The group is exposed to future movements in the values of assets held in the Fund and Scheme to meet future benefit payments. The purchase of the APP assets significantly reduces this risk as the value of the APP assets is expected to move in line with the value of liabilities. Uncertainty in cash funding Movements in the values of the obligations or assets may result in the group being required to provide higher levels of cash funding, although changes in the level of cash required can often be spread over a number of years. In addition, the group is also exposed to adverse changes in pension regulation. These risks are managed within the risk appetite of the Fund and Scheme. The sensitivity of the net obligations to changes in any of the variables are monitored and action is taken if any risk moves outside of the appetite. Full actuarial valuations are carried out for the Fund and Scheme every three years, updated by formal reviews at each anniversary date between. The actuarial assumptions used in the triennial valuation would normally be more prudent than those used for the purposes of IAS 19 reporting. The latest triennial valuation as at 31 December 2021 was completed on 21 September 2022. Where the Fund or Scheme are in deficit following the triennial valuations, the group and the trustee agree a deficit recovery plan. Both the Fund and Scheme have formal deficit recovery plans which aim to eliminate the deficits over a certain period of time. The triennial valuation as at 31 December 2021 showed a total funding deficit for both the Fund and the Scheme of \u00a3184m. A recovery plan has been agreed of \u00a398m per annum until 31 December 2024. Payments due under the recovery plan may pause if the estimated funding level of the schemes suggests the schemes are in surplus. Following a pause, the estimated funding level of the schemes will continue to be monitored, and payments would be restarted if the estimated funding level reduces back into a deficit. As a consequence, the expected contribution for 2023 will be determined based on the estimated funding level in 2023. The Fund and Scheme liabilities have an average duration of 13.9 years (2021: 17.8 years) and 13.2 years (2021: 16.9 years) respectively. The reduction in the duration is driven by the higher discount rate, as a result of material increases in interest rates over 2022. The expected undiscounted benefit payments to members of the Fund and Scheme, including pensions in payment secured by annuities purchased from the group, are shown in the unaudited chart below: Annuity payments Pensioner cash flows Employed deferred and deferred member cash flows Undiscounted benefit payments 120 100 80 60 40 20 0 Projected benefit payments (\u00a3m) 2023 2033 2043 2053 2063 2073 2083 The benefits paid from the defined benefit schemes are based on percentages of the employees\u2019 final pensionable salary for each year of credited service. The group has no liability for retirement benefits other than for pensions. The Fund and Scheme account for all of the UK and over 90% of worldwide assets of the group\u2019s defined benefit schemes. The principal actuarial assumptions for the Fund and Scheme are set out below. The higher mortality experience observed since 2021 as a result of Covid-19 is considered to be exceptional, and long-term mortality assumptions have not been revised to reflect this experience. Fund and Fund and Scheme Scheme 2022 2021 % % Rate used to discount liabilities 4.83 1.84 Rate of increase in pensions in payment (pre-2006 service) 3.74 3.79 Rate of increase in deferred pensions (pre-2006 service) 3.89 3.97 Rate of general inflation (RPI) 3.36 3.49 Post retirement mortality 2022 2021 Fund 72.5% PCMA00 / 82.5% PCFA00 72.5% PCMA00 / 82.5% PCFA00 Scheme 67.5% PCMA00 / 77.5% PCFA00 67.5% PCMA00 / 77.5% PCFA00 Mortality Improvements (Fund and Scheme)1 CMI 2020, base date 2019 CMI 2019, base date 2018 Sk = 7.5 Sk = 7.5 1. Long-term rates of 1.5% for males, 1.0% for females, applying up to age 85, with tapering down to 0% by age 110 (2021: long-term rates of 1.5% for males, 1.0% for females, applying up to age 85, with tapering down to 0% by age 110). This equates to average life expectancy as follows: Fund and Fund and Scheme Scheme 2022 2021 years years Normal retirement age 60.0 60.0 Male life expectancy at retirement age 87.0 87.2 Female life expectancy at retirement age 88.1 88.4 Male life expectancy at age 60, for a current 40-year old 89.0 89.3 Female life expectancy at age 60, for a current 40-year old 89.5 89.8 23 Provisions continued (iii) Retirement benefit obligations continued Defined benefit schemes continued Fund and CALA Homes Fund and CALA Homes Scheme and Overseas Scheme and Overseas 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Movement in present value of defined benefit obligations As at 1 January (2,348) (145) (2,615) (153) Current service cost (3) (4) (2) (4) Interest expense (42) (3) (32) (3) Actuarial remeasurement (recognised in the Consolidated Statement of Comprehensive Income) \u2013 Change in financial assumptions 816 46 194 11 \u2013 Change in demographic assumptions 23 \u2013 (19) \u2013 \u2013 Experience (28) (1) 23 (1) Benefits paid 102 7 103 6 Exchange differences \u2013 (5) \u2013 (1) As at 31 December (1,480) (105) (2,348) (145) Movement in fair value of plan assets As at 1 January 1,328 140 1,477 126 Expected return on plan assets at liability discount rate 24 3 18 2 Actuarial remeasurement (recognised in the Consolidated Statement of Comprehensive (482) (46) (165) 10 Income) Employer contributions 100 5 101 8 Benefits paid (102) (7) (103) (6) Exchange differences \u2013 5 \u2013 \u2013 As at 31 December 868 100 1,328 140 Gross pension obligations included in provisions (612) (5) (1,020) (5) Annuity obligations insured by LGAS 718 \u2013 990 \u2013 Gross defined benefit pension surplus/(deficit) 106 (5) (30) (5) Deferred tax on defined benefit pension surplus/(deficit) (27) 1 8 1 Net defined benefit pension surplus/(deficit) 79 (4) (22) (4) During 2022 annuities were purchased from the group. A premium of \u00a361m (2021: \u00a382m) was paid from the assets of the Fund and Scheme to purchase these annuities. These annuities are not recognised as an asset for IAS 19 purposes. 2022 has seen significant increases in interest rates. The net defined pension deficit above is not affected by the full extent of the market movement, because the schemes\u2019 assets are principally APPs, and around half the liabilities are matched through the purchase of annuities from the group. As a result, interest rate and inflation changes are broadly offset, and liquidity of the schemes is not significantly affected. The effect of assuming reasonable alternative assumptions in isolation is shown below for the Fund and Scheme combined. The effect is shown on the defined benefit obligation, net of annuities and the APP assets. Sensitivities are broadly symmetrical, but larger sensitivities are not necessarily proportionate. Value of assets and annuities 2022 Net defined benefit pension surplus/ (deficit) 2022 Value of assets and annuities 2021 Net defined benefit pension surplus/ (deficit) 2021 Defined benefit pension surplus/ (deficit) Defined benefit pension surplus/ (deficit) 20212022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m 1 year increase in life expectancy (59) 26 (33) (126) 50 76 0.1% pa decrease in discount rate (20) 20 \u2013 (41) 35 6 1% pa increase in discount rate 176 (177) (1) 356 (307) (49) 0.1% pa increase in RPI and CPI (8) 8 \u2013 (18) 15 3 0.5% pa increase in RPI and CPI (42) 43 1 (91) 74 17 The fair value of the plan assets at the end of the year is made up as follows: Valuation based on Valuation based on other than quoted market price quoted market price Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Equities \u2013 30 \u2013 \u2013 Bonds \u2013 13 \u2013 \u2013 Investment funds \u2013 39 \u2013 6 Properties \u2013 \u2013 \u2013 \u2013 Assured Payment Policy 1 \u2013 \u2013 820 \u2013 Cash and cash equivalents 48 12 \u2013 \u2013 Fair value of plan assets 48 94 820 6 Valuation based on Valuation based on other than quoted market price quoted market price Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Equities \u2013 37 \u2013 \u2013 Bonds \u2013 12 \u2013 \u2013 Investment funds \u2013 59 \u2013 \u2013 Properties \u2013 16 \u2013 \u2013 Assured Payment Policy \u2013 \u2013 1,214 \u2013 Cash and cash equivalents 114 16 \u2013 \u2013 Fair value of plan assets 114 140 1,214 \u2013 1. During the year, the Fund and the Scheme undertook APP top-ups under the existing contracts with Legal and General Assurance Society Limited (LGAS), a group company, resulting in a premium paid by the Fund and the Scheme of \u00a365m and \u00a318m respectively. The plan asset recognised is transferable and therefore has not been eliminated on consolidation within the group\u2019s financial statements. The bond assets are all AAA rated as at 31 December 2022 (31 December 2021: AAA rated). The following amounts have been charged to the income statement: Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Current service costs 3 4 2 4 Net interest expense 18 \u2013 14 1 Total amounts included in other expenses 21 4 16 5 ", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-616": { "value": "(iii) Retirement benefit obligations Defined contribution schemes The group operates the following principal defined contribution pension schemes in the UK and overseas: \u2022 Legal & General Group Personal Pension Plan (UK); \u2022 Legal & General Staff Stakeholder Pension Scheme (UK); \u2022 Legal & General America Inc. Savings Plan (US); and \u2022 CALA defined contribution pension scheme. Contributions of \u00a393m (2021: \u00a382m) were made during the year in respect of defined contribution schemes. Defined benefit schemes The group operates the following defined benefit pension schemes in the UK and overseas: \u2022 Legal & General Group UK Pension and Assurance Fund (the Fund). The Fund was closed to new members from January 1995; the latest triennial valuation as at 31 December 2021 was completed on 21 September 2022; \u2022 Legal & General Group UK Senior Pension Scheme (the Scheme). The Scheme was, with a few exceptions (principally transfers from the Fund), closed to new members from August 2000 and finally closed to new members from April 2007; the latest triennial valuation as at 31 December 2021 was completed on 21 September 2022; \u2022 Legal & General America Inc. Cash Balance Plan (US). The last full actuarial valuation was as at 31 December 2022; and \u2022 CALA Retirement and Death Benefits Scheme (UK). This scheme closed to new members from 31 December 2007 and closed to future accrual on 31 December 2018; the last triennial actuarial valuation was as at 6 April 2021. The UK defined benefit schemes operate within the UK pensions\u2019 regulatory framework. Certain of the following disclosures have only been presented in relation to the Fund and Scheme, as they represent the most significant defined benefit scheme obligations. The UK Fund and Scheme were closed to future accrual on 31 December 2015. As part of this arrangement, payments to the Fund and Scheme in respect of future accruals ceased from this date and were replaced with a company contribution payment of between 5% and 15% into a defined contribution arrangement. The assets of all UK defined benefit schemes are held in separate trustee administered funds to meet long-term pension obligations to past and present employees. Trustees are appointed to the schemes and have a responsibility to act in the best interest of the scheme beneficiaries. The trustees\u2019 long-term objectives are to minimise the risk that there are insufficient assets to meet the liabilities of the scheme over the longer term, control the on-going operational costs of the schemes and to maximise investment returns for the beneficiaries within an acceptable level of risk. The total number of members of the Fund and Scheme was: 2022 2021 Employed deferreds 73 79 Deferreds 2,557 2,782 Pensioners 3,911 3,791 Total 6,541 6,652 The group works closely with the trustees to develop an investment strategy for each UK scheme in order to meet the long-term objectives of the trustees as noted above. 23 Provisions continued (iii) Retirement benefit obligations continued Defined benefit schemes continued Certain parts of the liabilities of the Fund and Scheme are secured by way of annuities purchased from the group. These annuities are not recognised as an asset for IAS 19 purposes, but at 31 December 2022 the value of these annuities, on an IAS 19 basis, was \u00a3718m (2021: \u00a3990m). The remainder of the liabilities of the Fund and Scheme are secured by cash or by the way of Assured Payment Policies (APPs), purchased from the group to match the majority of future expected cash flows of the remaining members of the Fund and Scheme. The APPs are recognised as an asset for IAS 19 purposes, and their value is included in the table summarising the plan assets. The APPs aim to match the changes in the value of the liabilities due to changes in economic factors, namely interest rates, credit spreads and inflation. The APPs do not aim to match changes in the value of liabilities due to the actual mortality experience of members being different from the assumptions made in the valuation basis. The Fund and Scheme expose the group to a number of risks: Risk Detail Uncertainty in benefit payments The value of the group\u2019s liabilities for post-retirement benefits will ultimately depend on the amount of benefits paid out. This in turn will primarily depend on the level of inflation and how long individuals live. Volatility in asset values The group is exposed to future movements in the values of assets held in the Fund and Scheme to meet future benefit payments. The purchase of the APP assets significantly reduces this risk as the value of the APP assets is expected to move in line with the value of liabilities. Uncertainty in cash funding Movements in the values of the obligations or assets may result in the group being required to provide higher levels of cash funding, although changes in the level of cash required can often be spread over a number of years. In addition, the group is also exposed to adverse changes in pension regulation. These risks are managed within the risk appetite of the Fund and Scheme. The sensitivity of the net obligations to changes in any of the variables are monitored and action is taken if any risk moves outside of the appetite. Full actuarial valuations are carried out for the Fund and Scheme every three years, updated by formal reviews at each anniversary date between. The actuarial assumptions used in the triennial valuation would normally be more prudent than those used for the purposes of IAS 19 reporting. The latest triennial valuation as at 31 December 2021 was completed on 21 September 2022. Where the Fund or Scheme are in deficit following the triennial valuations, the group and the trustee agree a deficit recovery plan. Both the Fund and Scheme have formal deficit recovery plans which aim to eliminate the deficits over a certain period of time. The triennial valuation as at 31 December 2021 showed a total funding deficit for both the Fund and the Scheme of \u00a3184m. A recovery plan has been agreed of \u00a398m per annum until 31 December 2024. Payments due under the recovery plan may pause if the estimated funding level of the schemes suggests the schemes are in surplus. Following a pause, the estimated funding level of the schemes will continue to be monitored, and payments would be restarted if the estimated funding level reduces back into a deficit. As a consequence, the expected contribution for 2023 will be determined based on the estimated funding level in 2023. The Fund and Scheme liabilities have an average duration of 13.9 years (2021: 17.8 years) and 13.2 years (2021: 16.9 years) respectively. The reduction in the duration is driven by the higher discount rate, as a result of material increases in interest rates over 2022. The expected undiscounted benefit payments to members of the Fund and Scheme, including pensions in payment secured by annuities purchased from the group, are shown in the unaudited chart below: Annuity payments Pensioner cash flows Employed deferred and deferred member cash flows Undiscounted benefit payments 120 100 80 60 40 20 0 Projected benefit payments (\u00a3m) 2023 2033 2043 2053 2063 2073 2083 The benefits paid from the defined benefit schemes are based on percentages of the employees\u2019 final pensionable salary for each year of credited service. The group has no liability for retirement benefits other than for pensions. The Fund and Scheme account for all of the UK and over 90% of worldwide assets of the group\u2019s defined benefit schemes. The principal actuarial assumptions for the Fund and Scheme are set out below. The higher mortality experience observed since 2021 as a result of Covid-19 is considered to be exceptional, and long-term mortality assumptions have not been revised to reflect this experience. Fund and Fund and Scheme Scheme 2022 2021 % % Rate used to discount liabilities 4.83 1.84 Rate of increase in pensions in payment (pre-2006 service) 3.74 3.79 Rate of increase in deferred pensions (pre-2006 service) 3.89 3.97 Rate of general inflation (RPI) 3.36 3.49 Post retirement mortality 2022 2021 Fund 72.5% PCMA00 / 82.5% PCFA00 72.5% PCMA00 / 82.5% PCFA00 Scheme 67.5% PCMA00 / 77.5% PCFA00 67.5% PCMA00 / 77.5% PCFA00 Mortality Improvements (Fund and Scheme)1 CMI 2020, base date 2019 CMI 2019, base date 2018 Sk = 7.5 Sk = 7.5 1. Long-term rates of 1.5% for males, 1.0% for females, applying up to age 85, with tapering down to 0% by age 110 (2021: long-term rates of 1.5% for males, 1.0% for females, applying up to age 85, with tapering down to 0% by age 110). This equates to average life expectancy as follows: Fund and Fund and Scheme Scheme 2022 2021 years years Normal retirement age 60.0 60.0 Male life expectancy at retirement age 87.0 87.2 Female life expectancy at retirement age 88.1 88.4 Male life expectancy at age 60, for a current 40-year old 89.0 89.3 Female life expectancy at age 60, for a current 40-year old 89.5 89.8 23 Provisions continued (iii) Retirement benefit obligations continued Defined benefit schemes continued Fund and CALA Homes Fund and CALA Homes Scheme and Overseas Scheme and Overseas 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Movement in present value of defined benefit obligations As at 1 January (2,348) (145) (2,615) (153) Current service cost (3) (4) (2) (4) Interest expense (42) (3) (32) (3) Actuarial remeasurement (recognised in the Consolidated Statement of Comprehensive Income) \u2013 Change in financial assumptions 816 46 194 11 \u2013 Change in demographic assumptions 23 \u2013 (19) \u2013 \u2013 Experience (28) (1) 23 (1) Benefits paid 102 7 103 6 Exchange differences \u2013 (5) \u2013 (1) As at 31 December (1,480) (105) (2,348) (145) Movement in fair value of plan assets As at 1 January 1,328 140 1,477 126 Expected return on plan assets at liability discount rate 24 3 18 2 Actuarial remeasurement (recognised in the Consolidated Statement of Comprehensive (482) (46) (165) 10 Income) Employer contributions 100 5 101 8 Benefits paid (102) (7) (103) (6) Exchange differences \u2013 5 \u2013 \u2013 As at 31 December 868 100 1,328 140 Gross pension obligations included in provisions (612) (5) (1,020) (5) Annuity obligations insured by LGAS 718 \u2013 990 \u2013 Gross defined benefit pension surplus/(deficit) 106 (5) (30) (5) Deferred tax on defined benefit pension surplus/(deficit) (27) 1 8 1 Net defined benefit pension surplus/(deficit) 79 (4) (22) (4) During 2022 annuities were purchased from the group. A premium of \u00a361m (2021: \u00a382m) was paid from the assets of the Fund and Scheme to purchase these annuities. These annuities are not recognised as an asset for IAS 19 purposes. 2022 has seen significant increases in interest rates. The net defined pension deficit above is not affected by the full extent of the market movement, because the schemes\u2019 assets are principally APPs, and around half the liabilities are matched through the purchase of annuities from the group. As a result, interest rate and inflation changes are broadly offset, and liquidity of the schemes is not significantly affected. The effect of assuming reasonable alternative assumptions in isolation is shown below for the Fund and Scheme combined. The effect is shown on the defined benefit obligation, net of annuities and the APP assets. Sensitivities are broadly symmetrical, but larger sensitivities are not necessarily proportionate. Value of assets and annuities 2022 Net defined benefit pension surplus/ (deficit) 2022 Value of assets and annuities 2021 Net defined benefit pension surplus/ (deficit) 2021 Defined benefit pension surplus/ (deficit) Defined benefit pension surplus/ (deficit) 20212022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m 1 year increase in life expectancy (59) 26 (33) (126) 50 76 0.1% pa decrease in discount rate (20) 20 \u2013 (41) 35 6 1% pa increase in discount rate 176 (177) (1) 356 (307) (49) 0.1% pa increase in RPI and CPI (8) 8 \u2013 (18) 15 3 0.5% pa increase in RPI and CPI (42) 43 1 (91) 74 17 The fair value of the plan assets at the end of the year is made up as follows: Valuation based on Valuation based on other than quoted market price quoted market price Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Equities \u2013 30 \u2013 \u2013 Bonds \u2013 13 \u2013 \u2013 Investment funds \u2013 39 \u2013 6 Properties \u2013 \u2013 \u2013 \u2013 Assured Payment Policy 1 \u2013 \u2013 820 \u2013 Cash and cash equivalents 48 12 \u2013 \u2013 Fair value of plan assets 48 94 820 6 Valuation based on Valuation based on other than quoted market price quoted market price Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Equities \u2013 37 \u2013 \u2013 Bonds \u2013 12 \u2013 \u2013 Investment funds \u2013 59 \u2013 \u2013 Properties \u2013 16 \u2013 \u2013 Assured Payment Policy \u2013 \u2013 1,214 \u2013 Cash and cash equivalents 114 16 \u2013 \u2013 Fair value of plan assets 114 140 1,214 \u2013 1. During the year, the Fund and the Scheme undertook APP top-ups under the existing contracts with Legal and General Assurance Society Limited (LGAS), a group company, resulting in a premium paid by the Fund and the Scheme of \u00a365m and \u00a318m respectively. The plan asset recognised is transferable and therefore has not been eliminated on consolidation within the group\u2019s financial statements. The bond assets are all AAA rated as at 31 December 2022 (31 December 2021: AAA rated). The following amounts have been charged to the income statement: Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Current service costs 3 4 2 4 Net interest expense 18 \u2013 14 1 Total amounts included in other expenses 21 4 16 5 ", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-632": { "value": "Defined contribution schemes The group operates the following principal defined contribution pension schemes in the UK and overseas: \u2022 Legal & General Group Personal Pension Plan (UK); \u2022 Legal & General Staff Stakeholder Pension Scheme (UK); \u2022 Legal & General America Inc. Savings Plan (US); and \u2022 CALA defined contribution pension scheme. Contributions of \u00a393m (2021: \u00a382m) were made during the year in respect of defined contribution schemes. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedContributionPlansExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-633": { "value": "Defined benefit schemes The group operates the following defined benefit pension schemes in the UK and overseas: \u2022 Legal & General Group UK Pension and Assurance Fund (the Fund). The Fund was closed to new members from January 1995; the latest triennial valuation as at 31 December 2021 was completed on 21 September 2022; \u2022 Legal & General Group UK Senior Pension Scheme (the Scheme). The Scheme was, with a few exceptions (principally transfers from the Fund), closed to new members from August 2000 and finally closed to new members from April 2007; the latest triennial valuation as at 31 December 2021 was completed on 21 September 2022; \u2022 Legal & General America Inc. Cash Balance Plan (US). The last full actuarial valuation was as at 31 December 2022; and \u2022 CALA Retirement and Death Benefits Scheme (UK). This scheme closed to new members from 31 December 2007 and closed to future accrual on 31 December 2018; the last triennial actuarial valuation was as at 6 April 2021. The UK defined benefit schemes operate within the UK pensions\u2019 regulatory framework. Certain of the following disclosures have only been presented in relation to the Fund and Scheme, as they represent the most significant defined benefit scheme obligations. The UK Fund and Scheme were closed to future accrual on 31 December 2015. As part of this arrangement, payments to the Fund and Scheme in respect of future accruals ceased from this date and were replaced with a company contribution payment of between 5% and 15% into a defined contribution arrangement. The assets of all UK defined benefit schemes are held in separate trustee administered funds to meet long-term pension obligations to past and present employees. Trustees are appointed to the schemes and have a responsibility to act in the best interest of the scheme beneficiaries. The trustees\u2019 long-term objectives are to minimise the risk that there are insufficient assets to meet the liabilities of the scheme over the longer term, control the on-going operational costs of the schemes and to maximise investment returns for the beneficiaries within an acceptable level of risk. The total number of members of the Fund and Scheme was: 2022 2021 Employed deferreds 73 79 Deferreds 2,557 2,782 Pensioners 3,911 3,791 Total 6,541 6,652 The group works closely with the trustees to develop an investment strategy for each UK scheme in order to meet the long-term objectives of the trustees as noted above. 23 Provisions continued (iii) Retirement benefit obligations continued Defined benefit schemes continued Certain parts of the liabilities of the Fund and Scheme are secured by way of annuities purchased from the group. These annuities are not recognised as an asset for IAS 19 purposes, but at 31 December 2022 the value of these annuities, on an IAS 19 basis, was \u00a3718m (2021: \u00a3990m). The remainder of the liabilities of the Fund and Scheme are secured by cash or by the way of Assured Payment Policies (APPs), purchased from the group to match the majority of future expected cash flows of the remaining members of the Fund and Scheme. The APPs are recognised as an asset for IAS 19 purposes, and their value is included in the table summarising the plan assets. The APPs aim to match the changes in the value of the liabilities due to changes in economic factors, namely interest rates, credit spreads and inflation. The APPs do not aim to match changes in the value of liabilities due to the actual mortality experience of members being different from the assumptions made in the valuation basis. The Fund and Scheme expose the group to a number of risks: Risk Detail Uncertainty in benefit payments The value of the group\u2019s liabilities for post-retirement benefits will ultimately depend on the amount of benefits paid out. This in turn will primarily depend on the level of inflation and how long individuals live. Volatility in asset values The group is exposed to future movements in the values of assets held in the Fund and Scheme to meet future benefit payments. The purchase of the APP assets significantly reduces this risk as the value of the APP assets is expected to move in line with the value of liabilities. Uncertainty in cash funding Movements in the values of the obligations or assets may result in the group being required to provide higher levels of cash funding, although changes in the level of cash required can often be spread over a number of years. In addition, the group is also exposed to adverse changes in pension regulation. These risks are managed within the risk appetite of the Fund and Scheme. The sensitivity of the net obligations to changes in any of the variables are monitored and action is taken if any risk moves outside of the appetite. Full actuarial valuations are carried out for the Fund and Scheme every three years, updated by formal reviews at each anniversary date between. The actuarial assumptions used in the triennial valuation would normally be more prudent than those used for the purposes of IAS 19 reporting. The latest triennial valuation as at 31 December 2021 was completed on 21 September 2022. Where the Fund or Scheme are in deficit following the triennial valuations, the group and the trustee agree a deficit recovery plan. Both the Fund and Scheme have formal deficit recovery plans which aim to eliminate the deficits over a certain period of time. The triennial valuation as at 31 December 2021 showed a total funding deficit for both the Fund and the Scheme of \u00a3184m. A recovery plan has been agreed of \u00a398m per annum until 31 December 2024. Payments due under the recovery plan may pause if the estimated funding level of the schemes suggests the schemes are in surplus. Following a pause, the estimated funding level of the schemes will continue to be monitored, and payments would be restarted if the estimated funding level reduces back into a deficit. As a consequence, the expected contribution for 2023 will be determined based on the estimated funding level in 2023. The Fund and Scheme liabilities have an average duration of 13.9 years (2021: 17.8 years) and 13.2 years (2021: 16.9 years) respectively. The reduction in the duration is driven by the higher discount rate, as a result of material increases in interest rates over 2022. The expected undiscounted benefit payments to members of the Fund and Scheme, including pensions in payment secured by annuities purchased from the group, are shown in the unaudited chart below: Annuity payments Pensioner cash flows Employed deferred and deferred member cash flows Undiscounted benefit payments 120 100 80 60 40 20 0 Projected benefit payments (\u00a3m) 2023 2033 2043 2053 2063 2073 2083 The benefits paid from the defined benefit schemes are based on percentages of the employees\u2019 final pensionable salary for each year of credited service. The group has no liability for retirement benefits other than for pensions. The Fund and Scheme account for all of the UK and over 90% of worldwide assets of the group\u2019s defined benefit schemes. The principal actuarial assumptions for the Fund and Scheme are set out below. The higher mortality experience observed since 2021 as a result of Covid-19 is considered to be exceptional, and long-term mortality assumptions have not been revised to reflect this experience. Fund and Fund and Scheme Scheme 2022 2021 % % Rate used to discount liabilities 4.83 1.84 Rate of increase in pensions in payment (pre-2006 service) 3.74 3.79 Rate of increase in deferred pensions (pre-2006 service) 3.89 3.97 Rate of general inflation (RPI) 3.36 3.49 Post retirement mortality 2022 2021 Fund 72.5% PCMA00 / 82.5% PCFA00 72.5% PCMA00 / 82.5% PCFA00 Scheme 67.5% PCMA00 / 77.5% PCFA00 67.5% PCMA00 / 77.5% PCFA00 Mortality Improvements (Fund and Scheme)1 CMI 2020, base date 2019 CMI 2019, base date 2018 Sk = 7.5 Sk = 7.5 1. Long-term rates of 1.5% for males, 1.0% for females, applying up to age 85, with tapering down to 0% by age 110 (2021: long-term rates of 1.5% for males, 1.0% for females, applying up to age 85, with tapering down to 0% by age 110). This equates to average life expectancy as follows: Fund and Fund and Scheme Scheme 2022 2021 years years Normal retirement age 60.0 60.0 Male life expectancy at retirement age 87.0 87.2 Female life expectancy at retirement age 88.1 88.4 Male life expectancy at age 60, for a current 40-year old 89.0 89.3 Female life expectancy at age 60, for a current 40-year old 89.5 89.8 23 Provisions continued (iii) Retirement benefit obligations continued Defined benefit schemes continued Fund and CALA Homes Fund and CALA Homes Scheme and Overseas Scheme and Overseas 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Movement in present value of defined benefit obligations As at 1 January (2,348) (145) (2,615) (153) Current service cost (3) (4) (2) (4) Interest expense (42) (3) (32) (3) Actuarial remeasurement (recognised in the Consolidated Statement of Comprehensive Income) \u2013 Change in financial assumptions 816 46 194 11 \u2013 Change in demographic assumptions 23 \u2013 (19) \u2013 \u2013 Experience (28) (1) 23 (1) Benefits paid 102 7 103 6 Exchange differences \u2013 (5) \u2013 (1) As at 31 December (1,480) (105) (2,348) (145) Movement in fair value of plan assets As at 1 January 1,328 140 1,477 126 Expected return on plan assets at liability discount rate 24 3 18 2 Actuarial remeasurement (recognised in the Consolidated Statement of Comprehensive (482) (46) (165) 10 Income) Employer contributions 100 5 101 8 Benefits paid (102) (7) (103) (6) Exchange differences \u2013 5 \u2013 \u2013 As at 31 December 868 100 1,328 140 Gross pension obligations included in provisions (612) (5) (1,020) (5) Annuity obligations insured by LGAS 718 \u2013 990 \u2013 Gross defined benefit pension surplus/(deficit) 106 (5) (30) (5) Deferred tax on defined benefit pension surplus/(deficit) (27) 1 8 1 Net defined benefit pension surplus/(deficit) 79 (4) (22) (4) During 2022 annuities were purchased from the group. A premium of \u00a361m (2021: \u00a382m) was paid from the assets of the Fund and Scheme to purchase these annuities. These annuities are not recognised as an asset for IAS 19 purposes. 2022 has seen significant increases in interest rates. The net defined pension deficit above is not affected by the full extent of the market movement, because the schemes\u2019 assets are principally APPs, and around half the liabilities are matched through the purchase of annuities from the group. As a result, interest rate and inflation changes are broadly offset, and liquidity of the schemes is not significantly affected. The effect of assuming reasonable alternative assumptions in isolation is shown below for the Fund and Scheme combined. The effect is shown on the defined benefit obligation, net of annuities and the APP assets. Sensitivities are broadly symmetrical, but larger sensitivities are not necessarily proportionate. Value of assets and annuities 2022 Net defined benefit pension surplus/ (deficit) 2022 Value of assets and annuities 2021 Net defined benefit pension surplus/ (deficit) 2021 Defined benefit pension surplus/ (deficit) Defined benefit pension surplus/ (deficit) 20212022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m 1 year increase in life expectancy (59) 26 (33) (126) 50 76 0.1% pa decrease in discount rate (20) 20 \u2013 (41) 35 6 1% pa increase in discount rate 176 (177) (1) 356 (307) (49) 0.1% pa increase in RPI and CPI (8) 8 \u2013 (18) 15 3 0.5% pa increase in RPI and CPI (42) 43 1 (91) 74 17 The fair value of the plan assets at the end of the year is made up as follows: Valuation based on Valuation based on other than quoted market price quoted market price Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Equities \u2013 30 \u2013 \u2013 Bonds \u2013 13 \u2013 \u2013 Investment funds \u2013 39 \u2013 6 Properties \u2013 \u2013 \u2013 \u2013 Assured Payment Policy 1 \u2013 \u2013 820 \u2013 Cash and cash equivalents 48 12 \u2013 \u2013 Fair value of plan assets 48 94 820 6 Valuation based on Valuation based on other than quoted market price quoted market price Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Equities \u2013 37 \u2013 \u2013 Bonds \u2013 12 \u2013 \u2013 Investment funds \u2013 59 \u2013 \u2013 Properties \u2013 16 \u2013 \u2013 Assured Payment Policy \u2013 \u2013 1,214 \u2013 Cash and cash equivalents 114 16 \u2013 \u2013 Fair value of plan assets 114 140 1,214 \u2013 1. During the year, the Fund and the Scheme undertook APP top-ups under the existing contracts with Legal and General Assurance Society Limited (LGAS), a group company, resulting in a premium paid by the Fund and the Scheme of \u00a365m and \u00a318m respectively. The plan asset recognised is transferable and therefore has not been eliminated on consolidation within the group\u2019s financial statements. The bond assets are all AAA rated as at 31 December 2022 (31 December 2021: AAA rated). The following amounts have been charged to the income statement: Fund and Scheme CALA Homes and Overseas Fund and Scheme CALA Homes and Overseas 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Current service costs 3 4 2 4 Net interest expense 18 \u2013 14 1 Total amounts included in other expenses 21 4 16 5 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedBenefitPlansExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-573": { "value": "Derivative liabilities and repurchase agreements are measured at fair value, with changes in fair value recognised in profit or loss. The fair value of derivative liabilities is derived using broker quotes or models such as option pricing models, simulation models or a combination of models. The inputs for these models include a range of factors which are deemed to be observable, including current market and contractual prices for underlying instruments, period to maturity, correlations, yield curves and volatility of the underlying instruments. Repurchase agreements are valued based on the discounted cash flows expected to be paid, using an observable market interest rate, in line with the value of the underlying security. Collateral repayable on short position reverse repurchase agreements and other financial liabilities balances, including FX spots, broker and other payables, are measured at amortised cost. The carrying value of these liabilities approximates their fair value. Trail commission represents a liability for the present value of future commission costs on distribution agreements with intermediaries, recognised in the balance sheet on inception of the contract. At each subsequent reporting date the liability is remeasured, with changes reflected in profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-574": { "value": "2022 2021 \u00a3m \u00a3m Derivative liabilities 51,190 15,718 Repurchase agreements1 31,533 46,331 Other financial liabilities2 12,329 12,215 Total payables and other financial liabilities 95,052 74,264 Due within 12 months 41,064 53,250 Due after 12 months 53,988 21,014 1. Repurchase agreements are presented gross, however they and their related assets (included within debt securities) are subject to master netting arrangements. The significant majority of repurchase agreements are unit linked. 2. Other financial liabilities include trail commission, lease liabilities, FX spots and the value of short positions taken out to cover reverse repurchase agreements. The value of short positions as at 31 December 2022 was \u00a34,960m (2021: \u00a35,418m). Fair value hierarchy Amortised Total Level 1 Level 2 Level 3 cost 1 As at 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Derivative liabilities 51,190 448 50,717 25 \u2013 Repurchase agreements 31,533 \u2013 31,533 \u2013 \u2013 Other financial liabilities 12,329 4,533 644 39 7,113 Total payables and other financial liabilities 95,052 4,981 82,894 64 7,113 Amortised Total Level 1 Level 2 Level 3 cost 1 As at 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Derivative liabilities 15,718 331 15,316 71 \u2013 Repurchase agreements 46,331 \u2013 46,331 \u2013 \u2013 Other financial liabilities 12,215 5,438 55 \u2013 6,722 Total payables and other financial liabilities 74,264 5,769 61,702 71 6,722 1. The carrying value of payables and other financial liabilities at amortised cost approximates its fair value. Significant transfers between levels There have been no significant transfers of liabilities between Levels 1, 2 and 3 for the year ended 31 December 2022 (2021: no significant transfers). ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-575": { "value": "The group leases offices, vehicles, IT equipment and investment properties under non-cancellable operating lease agreements. The group has elected to make use of the recognition exemptions as permitted in respect of short-term leases (lease contracts with a term of 12 months or less), and lease contracts for which the underlying asset is of low value. Such leases are not recognised on the Consolidated Balance Sheet but the group recognises the associated lease payments as an expense over the lease term. As a lessee, the group recognises leases on the balance sheet as \u2018right-of-use\u2019 assets and lease liabilities. The right-of-use assets are either classified as property, plant and equipment or investment property. The right-of-use assets\u2019 value is initially recognised as the calculated value of the lease liabilities, initial direct costs and incentives received. The right-of use assets are subsequently accounted for in accordance with the cost model in IAS 16, \u2018Property, Plant and Equipment\u2019 or as investment property under IAS 40, \u2018Investment Property\u2019. The group also assesses right-of-use assets classified as property, plant and equipment for impairment when such indicators exist. The initial measurement of the lease liabilities is made up of the present value of lease payments to be made over the lease term, including fixed lease payments and excluding lease incentive receivables. The group uses the incremental borrowing rate as a discount rate for calculating the lease liabilities. The lease liabilities are unwound over the term of the lease giving rise to an interest expense. Additionally, the liabilities are reduced when lease payments are made. The group reassesses the carrying amount of lease liabilities and right-of-use assets if certain events occur that modify the original assumptions used to calculate the lease balances upon initial recognition. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-576": { "value": "The table below describes the nature of the group\u2019s leasing activities by type of right-of-use asset recognised on the Consolidated Balance Sheet within Property, plant and equipment:1 Office Office buildings IT Vehicles Total buildings IT Vehicles Total 2022 2022 2022 2022 2021 2021 2021 2021 Carrying amount \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m As at 1 January 157 22 1 180 167 35 3 205 Additions 6 \u2013 \u2013 6 14 \u2013 \u2013 14 Depreciation for the year (25) (13) (1) (39) (23) (13) (2) (38) Disposals \u2013 (1) \u2013 (1) (1) \u2013 \u2013 (1) Increase due to currency translation 6 \u2013 \u2013 6 \u2013 \u2013 \u2013 \u2013 Revaluation 2 (4) \u2013 \u2013 (4) \u2013 \u2013 \u2013 \u2013 As at 31 December 140 8 \u2013 148 157 22 1 180 1. Excludes investment property right-of-use assets, which are presented as part of the Investment property disclosure in Note 10. 2. Revaluation relates to an early termination of a building lease. The maturity profile of lease liabilities is presented in the table below1 . Lease liabilities are included within Payables and other financial liabilities (See Note 24). Undiscounted lease payments Unpaid finance charge Present value Undiscounted lease payments Unpaid finance charge Present value 2022 2022 2022 2021 2021 2021 As at 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Within 1 year 37 (8) 29 44 (9) 35 1-2 years 32 (6) 26 35 (7) 28 2-3 years 26 (5) 21 33 (6) 27 3-4 years 25 (4) 21 27 (5) 22 4-5 years 18 (4) 14 26 (4) 22 After 5 years 171 (105) 66 181 (106) 75 Total lease liabilities 309 (132) 177 346 (137) 209 1. Includes investment property lease liability. 25 Leases continued Interest expense of \u00a38m (2021: \u00a310m) on lease liabilities is included in finance costs. The remaining terms on the group\u2019s leases range from 1 to 235 years (2021: 1 to 236 years), with approximately 30% of the leases (2021: 29%) having extension options and 60% of these leases (2021: 72%) having termination options. Extension and termination options are included in various leases across the group and are used to maximise operational flexibility in terms of managing the assets used in the group\u2019s operations. The majority of extension and termination options held are exercisable only by the group and not by the respective lessor. At 31 December 2022 the group had committed to no additional leases which had not yet commenced (2021: committed to no additional leases). Income from sub-leasing right-of-use assets is reflected in Rental Income within Investment return (see Note 29). ", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-577": { "value": "26 Management of capital resources Solvency II The Solvency II financial information in this note is estimated and unaudited. The group calculates its Solvency II capital requirements using a Partial Internal Model. The table below shows the group Own Funds, Solvency Capital Requirement (SCR) and Surplus Own Funds, based on the Partial Internal Model, Matching Adjustment and Transitional Measures on Technical Provisions (TMTP) (recalculated as at 31 December 2022). The group is required to measure and monitor its capital resources on a regulatory basis and to comply with the minimum capital requirements of regulators in each territory in which it operates. At a group level, Legal & General has to comply with the requirements established by the Solvency II Framework Directive, as adopted by the PRA. As at 31 December 2022, and on the above basis, the group had a surplus of \u00a39,915m (31 December 2021: \u00a38,185m) over its Solvency Capital Requirement, corresponding to a Solvency II capital coverage ratio of 236% (31 December 2021: 187%). The Solvency II capital position is as follows: 2022 2021 \u00a3m \u00a3m Unrestricted Tier 1 Own Funds 13,393 13,254 Restricted Tier 1 Own Funds1 495 495 Tier 2 Subordinated liabilities 3,448 3,995 Eligibility restrictions (110) (183) Solvency II Own Funds 2,3 17, 226 17,561 Solvency Capital Requirement (7, 311) (9,376) Solvency II surplus 9,915 8,185 SCR Coverage ratio 236% 187% 1. Restricted Tier 1 Own Funds represent Perpetual restricted Tier 1 contingent convertible notes. 2. Solvency II Own Funds do not include an accrual for the final dividend of \u00a3829m (31 December 2021: \u00a3790m) declared after the balance sheet date. 3. Solvency II Own Funds allow for a Risk Margin of \u00a32,753m (2021: \u00a35,488m) and TMTP of \u00a32,136m (2021: \u00a34,736m). A reconciliation of the group\u2019s IFRS shareholders\u2019 equity to Solvency II Own Funds is given below: 2022 2021 \u00a3m \u00a3m IFRS equity 1 12,168 10,981 Remove DAC, goodwill and other intangible assets and associated liabilities (502) (406) Add IFRS carrying value of subordinated borrowings2 3,823 3,700 Insurance contract valuation differences 3 2,518 4,132 Difference in value of net deferred tax liabilities (608) (716) Other (63) 53 Eligibility restrictions (110) (183) Solvency II Own Funds 4 17, 226 17,561 1. IFRS equity represents equity attributable to owners of the parent and restricted Tier 1 convertible notes as per the Consolidated Balance Sheet. 2. Treated as available capital on the Solvency II balance sheet as the liabilities are subordinate to policyholder claims. 3. Differences in the measurement of technical provisions between IFRS and Solvency II. 4. Solvency II Own Funds do not include an accrual for the final dividend of \u00a3829m (31 December 2021: \u00a3790m) declared after the balance sheet date.
Capital management policies and objectives
The group aims to manage its capital resources to maintain financial strength, policyholder security and relative external ratings advantage. The group
also seeks to maximise its financial flexibility by maintaining strong liquidity and by utilising a range of alternative sources of capital including equity,
senior debt, subordinated debt and reinsurance.
Capital measures
The group measures its capital on a number of different bases, including those which comply with the regulatory frameworks within which the group
operates and those which the directors consider most appropriate for managing the business. The measures used by the group include:
Accounting and Economic bases
Management use financial information prepared on both an IFRS and Economic Capital basis to manage capital and cash flow usage and to determine
dividend paying capacity.
Regulatory bases
The financial strength of the group\u2019s insurance subsidiaries is measured under various local regulatory requirements (see below).
Basis of regulatory capital and corresponding regulatory capital requirements
In each country in which the group operates, the local insurance regulator specifies rules and guidance for the minimum amount and type of capital
which must be held by insurance subsidiaries in excess of their insurance liabilities. The minimum capital requirements have been maintained at all
times throughout the year. This helps to ensure that payments to policyholders can be made as they fall due.
The required capital is calculated by either assessing the additional assets which would be required to meet the insurance company\u2019s liabilities in
specified, stressed financial conditions, or by applying fixed percentages to the insurance company\u2019s liabilities and risk exposures. The requirements
in the different jurisdictions in which the group operates are detailed below:
Group regulatory basis
The group is required to comply with the Solvency II capital requirements calculated using the group\u2019s Partial Internal Model. The vast majority of the
risk to which the group is exposed is assessed on the Internal Model basis approved by the PRA. The group capital requirements for a handful of
smaller entities are assessed using the Standard Formula basis on materiality grounds. The group\u2019s capital requirements in respect of its US insurance
businesses are valued on a local statutory basis and Legal & General Reinsurance Company No. 2 and Legal & General America Reinsurance Limited are
valued on a Bermudan statutory basis, following PRA approval of the group\u2019s application to use the Deduction and Aggregation method to include these
businesses in the group solvency calculation.
UK regulatory basis
At the balance sheet date, required capital for the life business was based on the Solvency II Framework Directive, as adopted by the PRA. All material
EEA insurance firms, including Legal and General Assurance Society Limited, and Legal and General Assurance (Pensions Management) Limited
(LGIM\u2019s insurance subsidiary) are required to hold eligible own funds in excess of their Solvency Capital Requirement, calculated on a Partial Internal
Model basis. These firms, as well as the non-EEA insurance firm (Legal & General Reinsurance Company Limited, based in Bermuda) contribute over
90% of the group\u2019s SCR.
US regulatory basis
Required capital is determined to be the Company Action Level Risk Based Capital (RBC) based on the National Association of Insurance Commissioners
RBC model. RBC is a method of measuring the minimum amount of capital appropriate for an insurance company to support its overall business
operations, taking into account its size and risk profile. The calculation is based on applying factors to various asset, premium, claims, expense and
reserve items, with higher factors used for those items with greater underlying risk and lower factors for less risky items.
Bermudan regulatory basis
Bermudan regulated insurers are required to hold sufficient capital to meet the Bermudan Solvency Capital Requirement (BSCR). The BSCR model
follows a standard formula framework; capital attributed to each risk is calculated by applying specified stresses to the assets and liabilities.
The individual risk elements (excluding operational risk) are combined using a covariance matrix and then added to an operational risk charge.
", "dimensions": { "concept": "legalandgeneral:DisclosureOfManagementOfCapitalResources", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-578": { "value": "27 Acquisitions During 2022, the group made the following acquisition: \u2022 On 25 May 2022 Legal & General Capital (LGC) entered into a 50:50 partnership with US based real estate developer Ancora to create a real estate platform dedicated to driving life science, research and technology growth across the US. As part of the transaction, the group transferred consideration of $4m (\u00a33m) in cash, in return for a 50% shareholding in Ancora L&G LLC (Ancora L&G). Following the transaction, in accordance with the requirements of IFRS 3 \u2018Business Combinations\u2019, the group now controls Ancora L&G, and therefore the assets and liabilities acquired, and the financial results, have been included in the consolidated financial statements, using the group\u2019s accounting policies. Goodwill of \u00a33m has been recognised on consolidation ", "dimensions": { "concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-579": { "value": "The group provides a segmental analysis to enhance the understanding of the financial statements. Under the requirements of IFRS 8, \u2018Operating segments\u2019, 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-580": { "value": "In 2021, the group operated five core businesses across four reportable segments that are continuing operations, with Legal & General Retirement Retail (LGRR) and Legal & General Retirement Institutional (LGRI) combined into a single segment for reporting purposes, being Legal & General Retirement. From 1 January 2022, the group announced changes to the business unit responsibilities within the Executive Committee. Andrew Kail became the Chief Executive Officer of LGRI, succeeding Laura Mason who had previously moved to become CEO of Legal & General Capital (LGC). Our two retail businesses, LGRR and LGI, came together under the leadership of Bernie Hickman. Reportable segments have therefore been aligned to the group\u2019s five core businesses. Group expenses and debt costs continue to be reported separately. Transactions between segments are on normal commercial terms, and are included within the reported segments. To enable comparison, segmental information for the prior year has been restated accordingly. In the UK, annuity liabilities relating to LGRI and Retail Retirement are backed by a single portfolio of assets, and once a transaction has been completed the assets relating to any particular transaction are not tracked to the related liabilities. Investment variance is allocated to the two business segments based on the relative average size of the underlying insurance contract liabilities across the year. Reporting of assets and liabilities by reportable segment has not been included, as this is not information that is provided to key decision makers on a regular basis. The group\u2019s asset and liabilities are managed on a legal entity rather than reportable segment basis, in line with regulatory requirements. Financial information on the reportable segments is further broken down where relevant in order to better explain the drivers of the group\u2019s results. (i) Profit/(loss) for the year Group expenses Retail and debt LGRI 1 LGC LGIM Retirement 1 Insurance costs Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Adjusted operating profit/(loss) 1,257 509 340 484 341 (408) 2,523 Investment and other variances (21) (408) (81) (24) 841 (170) 137 Losses attributable to non-controlling interests \u2013 \u2013 \u2013 \u2013 \u2013 (1) (1) Profit/(loss) before tax attributable to equity holders 1,236 101 259 460 1,182 (579) 2,659 Tax (expense)/credit attributable to equity holders (155) (30) (30) (41) (247) 134 (369) Profit/(loss) for the year 1,081 71 229 419 935 (445) 2,290 Group expenses Retail and debt LGRI 1 LGC LGIM Retirement 1 Insurance costs Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Adjusted operating profit/(loss) 1,154 461 422 352 268 (395) 2,262 Investment and other variances 193 19 (11) 49 111 (128) 233 Losses attributable to non-controlling interests \u2013 \u2013 \u2013 \u2013 \u2013 (7) (7) Profit/(loss) before tax attributable to equity holders 1,347 480 411 401 379 (530) 2,488 Tax (expense)/credit attributable to equity holders (213) (93) (79) (63) (59) 62 (445) Profit/(loss) for the year 1,134 387 332 338 320 (468) 2,043 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. (ii) Revenue Revenue comprises of the following: Net premiums earned Revenue from insurance and investment contracts has been described in section (e) of this Note. Investment return Investment return has been described in Note 29 of this report. Fees from fund management and investment contracts* The group generates revenue from acting as the investment manager for clients. Fees charged on investment management services are based on the contractual fee arrangements applied to assets under management and recognised as revenue as the services are provided. The group\u2019s income from investment contracts is primarily derived from fees for administration and managing of funds in pension plans. Revenue generated on investment contracts is recognised as services are provided. No significant judgements are applied on the timing or transaction price. In the instances of performance fees where revenue is subject to meeting a certain performance threshold, such revenue is not recognised until the condition has been met, and it is highly probable that no significant reversal of amounts would occur. Variable costs directly related to securing new contracts are capitalised and amortised over the estimated period over which the revenue is earned. Transaction fees are charged to implement trades for clients. Such fees are charged at the time the transaction takes place and are based on the size of the underlying contract. House building* House building revenue arises from the sale of residential properties and land, and is recognised net of discounts and sales incentives. Sales of private houses are recognised on legal completion. Following the implementation of IFRS 15, \u2018Revenue from Contracts with Customers\u2019, the sale proceeds of part exchange properties are also included in revenue. Sales of social housing, where multiple units are developed and sold under a contractual agreement with a single customer, typically a housing association, are recognised over time in accordance with construction progress. Sales of land and commercial property are recognised on unconditional exchange, namely when contracts are exchanged or missives concluded and, where appropriate, construction is complete. The transaction price is determined using extensive research and expert judgement, current market values and regional variations. Warranties are provided on all properties and range from 2-10 years. Due to their features, these do not represent separate performance obligations. Professional services fees* The group\u2019s professional services fees revenue arises from professional services provided by employed surveyors and third party providers, panel management fees and administration fees. These fees are based on fee scales or contracts. Revenue is recognised when the service has been rendered. In addition, the group derives professional fees from facilitation of mortgage arrangements and related products such as conveyancing. These are based on an agreement/contract and could be tiered based on volume. The obligation in such instances is satisfied on completion of the mortgage/service, at which point the revenue is recognised. There is no significant judgement applied on the timing or amount of fee recognised. Insurance broker* Fees are charged on each performance obligation offered to the customer as per agreed structure. Revenue for placement services is recognised at the point in time when the intermediary has satisfied its performance obligation, that is when the terms of the insurance policy have been agreed contractually by the insurer and policyholder, and the insurer has a present right to payment from the policyholder. No significant judgements are applied on the timing or transaction price. * Contracts are either expected to last one year or less or reflect the right to consideration from a customer in an amount that corresponds directly with the value of the performance completed to date. As permitted under IFRS 15, the transaction price allocated to any unsatisfied contracts is not disclosed. 28 Segmental analysis continued (ii) Revenue continued (a) Total revenue 2022 2021 Note \u00a3m \u00a3m Total income1 (89,294) 45,450 Adjusted for: Share of profit from associates and joint ventures, net of tax 43 (47) (25) Gains on disposal of subsidiaries, associates and joint ventures, and other operations (7) (149) Total revenue (89,348) 45,276 1. Total income includes investment return losses of \u00a3100,365m (2021: gains of \u00a335,927m). (b) Total income Retail LGC and LGRI 1 LGIM 2,3 Retirement 1 Insurance other4 Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Internal income \u2013 178 \u2013 \u2013 (178) \u2013 External income (9,874) (78,636) (4,017) 1,371 1,862 (89,294) Total income (9,874) (78,458) (4,017) 1,371 1,684 (89,294) Retail LGC and LGRI 1 LGIM 2,3 Retirement 1 Insurance other 4 Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Internal income \u2013 179 \u2013 \u2013 (179) \u2013 External income 4,842 35,738 1,117 2,029 1,724 45,450 Total income 4,842 35,917 1,117 2,029 1,545 45,450 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. 2. LGIM internal income relates to investment management services provided to other segments. 3. LGIM external income primarily includes fees from fund management and investment returns on unit linked funds. 4. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments. (c) Fees from fund management and investment contracts Retail LGC and LGIM Retirement1 other 2 Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Investment contracts \u2013 98 \u2013 98 Investment management fees 953 \u2013 (178) 775 Transaction fees 26 \u2013 \u2013 26 Total fees from fund management and investment contracts 3 979 98 (178) 899 Retail LGC and LGIM Retirement 1 other2 Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Investment contracts \u2013 97 \u2013 97 Investment management fees 1,009 \u2013 (179) 830 Transaction fees 32 \u2013 \u2013 32 Total fees from fund management and investment contracts3 1,041 97 (179) 959 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. 2. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments. 3. Fees from fund management and investment contracts are a component of Total revenue disclosed in Note 28 (ii)(a). (d) Other operational income from contracts with customers Retail LGC and Retirement 1 Insurance other Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m House building \u2013 \u2013 1,429 1,429 Professional services fees 7 78 23 108 Insurance broker \u2013 47 \u2013 47 Total other operational income from contracts with customers 2 7 125 1,452 1,584 Retail LGC and Retirement1 Insurance other Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m House building \u2013 \u2013 1,314 1,314 Professional services fees 5 89 \u2013 94 Insurance broker \u2013 11 \u2013 11 Total other operational income from contracts with customers 2 5 100 1,314 1,419 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. 2. Total other operational income from contracts with customers is a component of Total revenue disclosed in Note 28 (ii)(a) and excludes the share of profit/loss from associates and joint ventures, and the gain on disposal of subsidiaries, associates and joint ventures. (e) Gross written premiums on insurance contracts Gross written premium represents the total premiums 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 income, but are included in the balance sheet investment contract liability. Outward reinsurance premiums are accounted for in the same accounting period as the related premiums for the direct or inwards reinsurance business being reinsured. Retail LGRI 1 Retirement 1 Insurance2 Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Gross written premiums 9,658 781 3,252 13,691 Retail LGRI1 Retirement 1 Insurance 2 Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Gross written premiums 6,551 813 3,011 10,375 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. 2. Includes \u00a3118m (2021: \u00a3109m) of gross written premiums relating to a residual reinsurance treaty following the disposal of the General Insurance business in 2019. ", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-617": { "value": "Revenue comprises of the following: Net premiums earned Revenue from insurance and investment contracts has been described in section (e) of this Note. Investment return Investment return has been described in Note 29 of this report. Fees from fund management and investment contracts* The group generates revenue from acting as the investment manager for clients. Fees charged on investment management services are based on the contractual fee arrangements applied to assets under management and recognised as revenue as the services are provided. The group\u2019s income from investment contracts is primarily derived from fees for administration and managing of funds in pension plans. Revenue generated on investment contracts is recognised as services are provided. No significant judgements are applied on the timing or transaction price. In the instances of performance fees where revenue is subject to meeting a certain performance threshold, such revenue is not recognised until the condition has been met, and it is highly probable that no significant reversal of amounts would occur. Variable costs directly related to securing new contracts are capitalised and amortised over the estimated period over which the revenue is earned. Transaction fees are charged to implement trades for clients. Such fees are charged at the time the transaction takes place and are based on the size of the underlying contract. House building* House building revenue arises from the sale of residential properties and land, and is recognised net of discounts and sales incentives. Sales of private houses are recognised on legal completion. Following the implementation of IFRS 15, \u2018Revenue from Contracts with Customers\u2019, the sale proceeds of part exchange properties are also included in revenue. Sales of social housing, where multiple units are developed and sold under a contractual agreement with a single customer, typically a housing association, are recognised over time in accordance with construction progress. Sales of land and commercial property are recognised on unconditional exchange, namely when contracts are exchanged or missives concluded and, where appropriate, construction is complete. The transaction price is determined using extensive research and expert judgement, current market values and regional variations. Warranties are provided on all properties and range from 2-10 years. Due to their features, these do not represent separate performance obligations. Professional services fees* The group\u2019s professional services fees revenue arises from professional services provided by employed surveyors and third party providers, panel management fees and administration fees. These fees are based on fee scales or contracts. Revenue is recognised when the service has been rendered. In addition, the group derives professional fees from facilitation of mortgage arrangements and related products such as conveyancing. These are based on an agreement/contract and could be tiered based on volume. The obligation in such instances is satisfied on completion of the mortgage/service, at which point the revenue is recognised. There is no significant judgement applied on the timing or amount of fee recognised. Insurance broker* Fees are charged on each performance obligation offered to the customer as per agreed structure. Revenue for placement services is recognised at the point in time when the intermediary has satisfied its performance obligation, that is when the terms of the insurance policy have been agreed contractually by the insurer and policyholder, and the insurer has a present right to payment from the policyholder. No significant judgements are applied on the timing or transaction price. * Contracts are either expected to last one year or less or reflect the right to consideration from a customer in an amount that corresponds directly with the value of the performance completed to date. As permitted under IFRS 15, the transaction price allocated to any unsatisfied contracts is not disclosed. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-618": { "value": "(ii) Revenue continued (a) Total revenue 2022 2021 Note \u00a3m \u00a3m Total income1 (89,294) 45,450 Adjusted for: Share of profit from associates and joint ventures, net of tax 43 (47) (25) Gains on disposal of subsidiaries, associates and joint ventures, and other operations (7) (149) Total revenue (89,348) 45,276 1. Total income includes investment return losses of \u00a3100,365m (2021: gains of \u00a335,927m). (b) Total income Retail LGC and LGRI 1 LGIM 2,3 Retirement 1 Insurance other4 Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Internal income \u2013 178 \u2013 \u2013 (178) \u2013 External income (9,874) (78,636) (4,017) 1,371 1,862 (89,294) Total income (9,874) (78,458) (4,017) 1,371 1,684 (89,294) Retail LGC and LGRI 1 LGIM 2,3 Retirement 1 Insurance other 4 Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Internal income \u2013 179 \u2013 \u2013 (179) \u2013 External income 4,842 35,738 1,117 2,029 1,724 45,450 Total income 4,842 35,917 1,117 2,029 1,545 45,450 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. 2. LGIM internal income relates to investment management services provided to other segments. 3. LGIM external income primarily includes fees from fund management and investment returns on unit linked funds. 4. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments. (c) Fees from fund management and investment contracts Retail LGC and LGIM Retirement1 other 2 Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Investment contracts \u2013 98 \u2013 98 Investment management fees 953 \u2013 (178) 775 Transaction fees 26 \u2013 \u2013 26 Total fees from fund management and investment contracts 3 979 98 (178) 899 Retail LGC and LGIM Retirement 1 other2 Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Investment contracts \u2013 97 \u2013 97 Investment management fees 1,009 \u2013 (179) 830 Transaction fees 32 \u2013 \u2013 32 Total fees from fund management and investment contracts3 1,041 97 (179) 959 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. 2. LGC and other includes LGC income, intra-segmental eliminations and group consolidation adjustments. 3. Fees from fund management and investment contracts are a component of Total revenue disclosed in Note 28 (ii)(a). (d) Other operational income from contracts with customers Retail LGC and Retirement 1 Insurance other Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m House building \u2013 \u2013 1,429 1,429 Professional services fees 7 78 23 108 Insurance broker \u2013 47 \u2013 47 Total other operational income from contracts with customers 2 7 125 1,452 1,584 Retail LGC and Retirement1 Insurance other Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m House building \u2013 \u2013 1,314 1,314 Professional services fees 5 89 \u2013 94 Insurance broker \u2013 11 \u2013 11 Total other operational income from contracts with customers 2 5 100 1,314 1,419 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. 2. Total other operational income from contracts with customers is a component of Total revenue disclosed in Note 28 (ii)(a) and excludes the share of profit/loss from associates and joint ventures, and the gain on disposal of subsidiaries, associates and joint ventures. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-619": { "value": "Gross written premium represents the total premiums 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 income, but are included in the balance sheet investment contract liability. Outward reinsurance premiums are accounted for in the same accounting period as the related premiums for the direct or inwards reinsurance business being reinsured. ", "dimensions": { "concept": "legalandgeneral:DescriptionOfAccountingPolicyForGrossWrittenPremiumsOnInsuranceContracts", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-620": { "value": "Retail LGRI 1 Retirement 1 Insurance2 Total For the year ended 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m Gross written premiums 9,658 781 3,252 13,691 Retail LGRI1 Retirement 1 Insurance 2 Total For the year ended 31 December 2021 \u00a3m \u00a3m \u00a3m \u00a3m Gross written premiums 6,551 813 3,011 10,375 1. From 1 January 2022, following changes to business unit responsibilities within the Executive Committee, the group\u2019s reportable segments have been updated to align with its five core businesses. Prior year comparatives have been restated to reflect this change in segmentation. 2. Includes \u00a3118m (2021: \u00a3109m) of gross written premiums relating to a residual reinsurance treaty following the disposal of the General Insurance business in 2019. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfGrossWrittenPremiumsOnInsuranceContracts", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-581": { "value": "Investment return includes fair value gains and losses, excluding fair value movements attributable to available-for-sale (AFS) investments, dividends, rent and interest. Dividends are accrued on an ex-dividend basis. Interest and rent are included on an accruals basis. Interest income for financial assets which are not classified as fair value through profit or loss (FVTPL) is recognised using the effective interest method. ", "dimensions": { "concept": "legalandgeneral:DescriptionOfAccountingPolicyForInvestmentReturn", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-582": { "value": "The group earns an investment return from holdings in financial instruments and property investments, held to either back insurance and investment contracts on behalf of policyholders or to deliver returns on group capital. 2022 2021 \u00a3m \u00a3m Dividend income 4,521 4,437 Interest income on financial investments at fair value through profit or loss 5,613 4,837 Other investment (expense)/income 1 (1,516) 219 (Losses)/gains on financial investments designated at fair value through profit or loss (102,333) 25,066 Losses on derivative instruments designated as held for trading (5,357) (30) Realised losses on financial assets designated as available-for-sale \u2013 (1) Financial investment return (99,072) 34,528 Rental income 422 375 Net fair value (losses)/gains on properties (1,715) 1,024 Property investment return (1,293) 1,399 Total investment return (100,365) 35,927 1. Other investment (expense)/income primarily comprises interest, gains and losses from other financial instruments, as well as loans and receivables, including those held at amortised cost. \u00a325m (2021: \u00a311m) of Other investment income is from financial investments designated as available-for-sale. There was no impairment on assets classified as available-for-sale during the year ", "dimensions": { "concept": "legalandgeneral:DisclosureOfInvestmentReturn", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-621": { "value": "The tax shown in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income comprises current and deferred tax. Current tax Current tax comprises tax payable on current year profits, adjusted for non-tax deductible or non-taxable items, and any adjustments to tax payable in respect of previous periods. Current tax is recognised in the Consolidated Income Statement unless it relates to items which are recognised in the Consolidated Statement of Comprehensive Income or directly in equity. Deferred tax Deferred tax is calculated on differences between the accounting value of assets and liabilities and their respective tax values. Deferred tax is also recognised in respect of unused tax losses to the extent it is probable that future taxable profits will arise against which the losses can be utilised. Deferred tax is charged or credited to the Consolidated Income Statement, except when it relates to items charged or credited to the Consolidated Statement of Comprehensive Income or charged or credited directly in equity. Tax attributable to policyholders and equity holders The total tax expense shown in the group\u2019s Consolidated Income Statement includes income tax borne by both policyholders and equity holders. This has been split between tax attributable to policyholders\u2019 returns and equity holders\u2019 profits. Policyholder tax comprises the tax suffered on policyholder investment returns, while equity holder tax is corporation tax charged on equity holder profit. The separate presentation is intended to provide more relevant information about the tax that the group pays on the profits that it makes. Use of estimates Tax balances include the use of estimates and assumptions which affect items reported in the Consolidated Balance Sheet and Consolidated Income Statement. Although these estimates are based on management\u2019s best knowledge of current circumstances and future events and actions, actual results may differ from those estimates. For tax this includes the determination of assets and liabilities recognised in respect of uncertain tax positions and the estimation of future taxable income supporting deferred tax asset recognition. As the group operates internationally, it is exposed to uncertain tax positions and changes in legislation in the jurisdictions in which it operates. The assessment of uncertain tax positions is subjective and significant management judgement is required. This judgement is based on interpretation of legislation, management experience and professional advice. The directors have assessed the group\u2019s uncertain tax positions and are comfortable that the provisions in place are not material individually or in aggregate, and that a reasonable possible alternative outcome in the next financial year would not have a material impact to the results of the group. Tax rates The table below provides a summary of the standard corporate income tax rates of the main territories we operate in. 2022 2021 UK 19.0% 19.0% USA 21.0% 21.0% Bermuda 0.0% 0.0% Ireland 12.5% 12.5% Global minimum tax regime The Organisation for Economic Co-operation and Development (OECD) released a framework in December 2021 to address concerns at a global level about tax contributions of large multinational corporations, with subsequent guidance issued in 2022 and early 2023. This reflects agreement from over 135 jurisdictions to introduce a global minimum tax rate of 15%. The UK has published draft legislation to implement the OECD framework and apply a top-up tax to profits that are otherwise taxed at less than 15%. As at 31 December 2022 this legislation has not yet been substantively enacted. Under the proposed rules, the group is expected to be liable to top-up tax from 1 January 2024 on profits arising in territories with low tax rates. The group\u2019s liability to top-up tax will depend on the details of the legislation when it is enacted. The group are closely monitoring the progress of the framework and draft legislation in the UK and other territories in which the group operates. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-583": { "value": "The tax shown in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income comprises current and deferred tax. Current tax Current tax comprises tax payable on current year profits, adjusted for non-tax deductible or non-taxable items, and any adjustments to tax payable in respect of previous periods. Current tax is recognised in the Consolidated Income Statement unless it relates to items which are recognised in the Consolidated Statement of Comprehensive Income or directly in equity. Deferred tax Deferred tax is calculated on differences between the accounting value of assets and liabilities and their respective tax values. Deferred tax is also recognised in respect of unused tax losses to the extent it is probable that future taxable profits will arise against which the losses can be utilised. Deferred tax is charged or credited to the Consolidated Income Statement, except when it relates to items charged or credited to the Consolidated Statement of Comprehensive Income or charged or credited directly in equity. Tax attributable to policyholders and equity holders The total tax expense shown in the group\u2019s Consolidated Income Statement includes income tax borne by both policyholders and equity holders. This has been split between tax attributable to policyholders\u2019 returns and equity holders\u2019 profits. Policyholder tax comprises the tax suffered on policyholder investment returns, while equity holder tax is corporation tax charged on equity holder profit. The separate presentation is intended to provide more relevant information about the tax that the group pays on the profits that it makes. Use of estimates Tax balances include the use of estimates and assumptions which affect items reported in the Consolidated Balance Sheet and Consolidated Income Statement. Although these estimates are based on management\u2019s best knowledge of current circumstances and future events and actions, actual results may differ from those estimates. For tax this includes the determination of assets and liabilities recognised in respect of uncertain tax positions and the estimation of future taxable income supporting deferred tax asset recognition. As the group operates internationally, it is exposed to uncertain tax positions and changes in legislation in the jurisdictions in which it operates. The assessment of uncertain tax positions is subjective and significant management judgement is required. This judgement is based on interpretation of legislation, management experience and professional advice. The directors have assessed the group\u2019s uncertain tax positions and are comfortable that the provisions in place are not material individually or in aggregate, and that a reasonable possible alternative outcome in the next financial year would not have a material impact to the results of the group. Tax rates The table below provides a summary of the standard corporate income tax rates of the main territories we operate in. 2022 2021 UK 19.0% 19.0% USA 21.0% 21.0% Bermuda 0.0% 0.0% Ireland 12.5% 12.5% Global minimum tax regime The Organisation for Economic Co-operation and Development (OECD) released a framework in December 2021 to address concerns at a global level about tax contributions of large multinational corporations, with subsequent guidance issued in 2022 and early 2023. This reflects agreement from over 135 jurisdictions to introduce a global minimum tax rate of 15%. The UK has published draft legislation to implement the OECD framework and apply a top-up tax to profits that are otherwise taxed at less than 15%. As at 31 December 2022 this legislation has not yet been substantively enacted. Under the proposed rules, the group is expected to be liable to top-up tax from 1 January 2024 on profits arising in territories with low tax rates. The group\u2019s liability to top-up tax will depend on the details of the legislation when it is enacted. The group are closely monitoring the progress of the framework and draft legislation in the UK and other territories in which the group operates. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-584": { "value": "(i) Tax expense in the Consolidated Income Statement 2022 2021 \u00a3m \u00a3m Current tax 446 531 Deferred tax \u2013 Origination or reversal of temporary differences in the year 36 (24) \u2013 Impact of revaluation of deferred tax balances (21) 58 Total deferred tax 15 34 Adjustment to equity holders\u2019 tax in respect of prior years (21) 24 Total tax expense 440 589 Less: tax attributable to policyholder returns (71) (144) Total tax expense attributable to equity holders 369 445 The tax expense attributable to equity holders differs from the tax calculated on profit before tax at the standard UK corporation tax rate as follows: 2022 2021 \u00a3m \u00a3m Profit before tax attributable to equity holders 2,659 2,488 Tax calculated at 19.00% 505 473 Adjusted for the effects of: Recurring reconciling items: (Lower)/higher rate of tax on profits taxed overseas 1 (84) (104) Income not subject to tax (3) \u2013 Non-deductible expenses (1) 6 Differences between taxable and accounting investment gains (9) (13) Other taxes on property and foreign income 6 \u2013 Unrecognised tax losses 17 1 Double tax relief2 (20) \u2013 Non-recurring reconciling items: Adjustments in respect of prior years 3 (21) 24 Impact of the revaluation of deferred tax balances 4 (21) 58 Tax expense/(credit) attributable to equity holders 369 445 Equity holders\u2019 effective tax rate 13.9% 17.9 % 1. The lower rate of tax on overseas profits is principally driven by the 0% rate of taxation arising in our Bermudan reinsurance company, which provides the group with regulatory capital flexibility for both our PRT business and our US term insurance business. This also includes the impact of our US operations which are taxed at 21%. 2. Double tax relief represents a UK tax credit available for overseas withholding tax suffered on dividend income. 3. Adjustments in respect of prior years relate to revisions of prior estimates. 4. The Finance Act 2021 increased the rate of corporation tax from 19% to 25% from 1 April 2023. The prevailing rate of UK corporation tax for the year remained at 19%. The future enacted tax rate of 25% has been used in the calculation of UK deferred tax assets and liabilities, as the rate of corporation tax that is expected to apply when the majority of those deferred tax balances reverse. The UK standard rate of corporation tax is used in the above reconciliation as a significant proportion of the group\u2019s profits are earned and are taxable in the UK, which is also the main domicile for the group. (ii) Deferred tax \u2013 Consolidated Balance Sheet Deferred tax assets and liabilities have been recognised/(provided) for temporary differences and unused tax losses. The recognition of deferred tax assets in respect of temporary differences and tax losses are supported by management\u2019s best estimate of future taxable profits to absorb the losses in future years. Deferred tax assets and liabilities presented on the Consolidated Balance Sheet have been offset to the extent it is permissible under the relevant accounting standards. The net movement in deferred tax assets and liabilities during the year is as follows: Tax Tax Net tax (charged)/ (charged)/ Net tax liability as at credited to credited Acquisitions/ liability as at 1 January the income to OCI disposals/ 31 December 2022 statement or equity transfers1 2022 Deferred tax (liabilities)/assets \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Deferred acquisition expenses 2 95 9 12 \u2013 116 Difference between the tax and accounting value of insurance contracts (695) (383) (23) 115 (986) \u2013 UK (269) 97 37 3 (132) \u2013 Overseas (426) (480) (60) 112 (854) Realised and unrealised gains on investments (83) 233 (3) (3) 144 Excess of depreciation over capital allowances 22 (1) \u2013 \u2013 21 Accounting provisions and other 55 76 (1) (108) 22 Trading losses 3 348 72 43 \u2013 463 Pension fund deficit 9 (15) (19) (1) (26) Acquired intangibles \u2013 1 \u2013 (3) (2) Net deferred tax (liabilities)/assets (249) (8) 9 \u2013 (248) Presented on the Consolidated Balance Sheet as: \u2013 Deferred tax assets 4 2 (2) \u2013 180 180 \u2013 Deferred tax liabilities (251) (6) 9 (180) (428) Net deferred tax (liabilities)/assets (249) (8) 9 \u2013 (248) 1. The movements through Acquisitions/disposals/transfers during the year reflect reclassifications only. The majority of these reclassifications relate to US deferred tax liabilities and net to \u00a3nil. 2. Deferred tax assets arising on deferred acquisition expenses relates solely to US balances as at 31 December 2022. 3. Trading losses consist solely of US operating losses (2021: \u00a3346m). The losses are not time restricted, and we expect to recover them over a period of 15 to 20 years, commensurate with the lifecycle of the underlying insurance contracts. In reaching this conclusion, we have considered past results, the different basis under which US companies are taxed, temporary differences that are expected to generate future profits against which the deferred tax can be offset, management actions, and future profit forecasts. The recoverability of deferred tax assets is routinely reviewed by management. 4. The deferred tax asset represents \u00a3168m of US unrealised losses on investments (2021: \u00a3nil), \u00a37m of UK unrealised losses on investments (2021: \u00a3nil) and \u00a35m of other US deferred tax assets (2021: \u00a3nil). These are not capable of being offset against any deferred tax liabilities or future trading profits. 30 Tax continued (ii) Deferred tax \u2013 Consolidated Balance Sheet continued Net tax liability as at 1 January 2021 \u00a3m Tax (charged)/ credited to the income statement \u00a3m Tax (charged)/ credited to OCI or equity \u00a3m Acquisitions/ disposals/ transfers1 \u00a3m Net tax liability as at 31 December 2021 \u00a3mDeferred tax (liabilities)/assets Deferred acquisition expenses 2 85 10 \u2013 \u2013 95 Difference between the tax and accounting value of insurance contracts (557) (135) (3) \u2013 (695) \u2013 UK (207) (58) (4) \u2013 (269) \u2013 Overseas (350) (77) 1 \u2013 (426) Realised and unrealised gains on investments1 (113) 23 \u2013 7 (83) Excess of depreciation over capital allowances 18 5 \u2013 (1) 22 Excess expenses 1 (1) \u2013 \u2013 \u2013 Accounting provisions and other1 54 1 \u2013 \u2013 55 Trading losses 3 289 60 \u2013 (1) 348 Pension fund deficit 22 (6) (7) \u2013 9 Acquired intangibles (1) 1 \u2013 \u2013 \u2013 Total net deferred tax (liabilities)/assets (202) (42) (10) 5 (249) Less: net deferred tax liabilities transferred on disposal 4 \u2013 5 \u2013 (5) \u2013 Net deferred tax (liabilities)/assets (202) (37) (10) \u2013 (249) Presented on the Consolidated Balance Sheet as: \u2013 Deferred tax assets 5 5 (3) \u2013 \u2013 2 \u2013 Deferred tax liabilities (207) (34) (10) \u2013 (251) Net deferred tax (liabilities)/assets (202) (37) (10) \u2013 (249) 1. The US deferred tax liability of \u00a3102m in respect of US bond contracts has been reclassified from Accounting provisions and other to Realised and unrealised gains on investments. The net impact on the total balance is \u00a3nil. 2. Deferred tax liabilities arising on deferred acquisition expenses relates solely to US balances as at 31 December 2021. 3. Trading losses include deferred tax on UK trade and US operating losses of \u00a32m (2020: \u00a35m) and \u00a3346m (2020: \u00a3284m) respectively. Overseas net deferred tax liabilities include a deferred tax asset of \u00a3346m (2020: \u00a3284m) on accumulated losses in our US insurance business. These losses are not time restricted, and we expect to recover them over a period of 15 to 20 years, commensurate with the lifecycle of the underlying insurance contracts. In reaching this conclusion, we have considered past results, the different basis under which US companies are taxed, temporary differences that are expected to generate future profits against which the deferred tax can be offset, management actions, and future profit forecasts. The recoverability of deferred tax assets is routinely reviewed by management. 4. Deferred tax assets and liabilities transferred on disposal relate to the deconsolidation of a number of subsidiaries following the Inspired Villages Group joint venture agreement with Natwest Group Pension Trustee Limited in August 2021. 5. The deferred tax asset recognised separately in the Consolidated Balance Sheet refers to deferred tax assets against which there are no appropriate deferred tax liabilities to offset the asset. The closing amount of \u00a32m (2020: \u00a35m) are restricted losses which cannot be offset against profits arising elsewhere in the group. Unrecognised deferred tax assets The group has the following unrelieved tax losses and deductible temporary differences carried forward as at 31 December 2022. No deferred tax asset has been recognised in respect of these as at 31 December 2022 (or 31 December 2021), as it is not probable that there will be suitable taxable profits emerging in future periods against which to relieve them. These tax assets will only be recognised if it becomes probable that suitable taxable profits will arise in future periods. Gross Tax Gross Tax 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Trading losses1 272 61 172 36 Capital losses 2 67 14 74 19 Excess management expense 9 2 9 2 Unrelieved interest payments on debt instruments 14 4 14 4 Unrecognised deferred tax assets 362 81 269 61 1. Gross trading losses includes \u00a3163m of UK trading losses (2021: \u00a361m), \u00a357m (2021: \u00a314m) related to the US business which are expected to expire between 2026 and 2032 and \u00a352m (2021: \u00a347m) related to other overseas jurisdictions. 2. Gross capital losses includes \u00a364m (2021: \u00a3nil) related to the US business. (iii) Current tax \u2013 Consolidated Balance Sheet 2022 2021 \u00a3m \u00a3m Tax recoverable within 12 months 52 46 Tax recoverable after 12 months 750 624 Current tax assets1 802 670 1. Of the total current tax asset \u00a3745m (2021: \u00a3619m) relates to amount recoverable in respect of withholding tax reclaims attributable to funds. 2022 2021 \u00a3m \u00a3m Tax due within 12 months 1 4 Tax due after 12 months 68 80 Current tax liabilities 69 84 (iv) Tax charged directly in equity 2022 2021 \u00a3m \u00a3m Current tax (6) 4 Deferred tax (7) (3) Tax (credit)/charge recognised directly in equity (13) 1 ", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-622": { "value": "(ii) Deferred tax \u2013 Consolidated Balance Sheet Deferred tax assets and liabilities have been recognised/(provided) for temporary differences and unused tax losses. The recognition of deferred tax assets in respect of temporary differences and tax losses are supported by management\u2019s best estimate of future taxable profits to absorb the losses in future years. Deferred tax assets and liabilities presented on the Consolidated Balance Sheet have been offset to the extent it is permissible under the relevant accounting standards. The net movement in deferred tax assets and liabilities during the year is as follows: Tax Tax Net tax (charged)/ (charged)/ Net tax liability as at credited to credited Acquisitions/ liability as at 1 January the income to OCI disposals/ 31 December 2022 statement or equity transfers1 2022 Deferred tax (liabilities)/assets \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m Deferred acquisition expenses 2 95 9 12 \u2013 116 Difference between the tax and accounting value of insurance contracts (695) (383) (23) 115 (986) \u2013 UK (269) 97 37 3 (132) \u2013 Overseas (426) (480) (60) 112 (854) Realised and unrealised gains on investments (83) 233 (3) (3) 144 Excess of depreciation over capital allowances 22 (1) \u2013 \u2013 21 Accounting provisions and other 55 76 (1) (108) 22 Trading losses 3 348 72 43 \u2013 463 Pension fund deficit 9 (15) (19) (1) (26) Acquired intangibles \u2013 1 \u2013 (3) (2) Net deferred tax (liabilities)/assets (249) (8) 9 \u2013 (248) Presented on the Consolidated Balance Sheet as: \u2013 Deferred tax assets 4 2 (2) \u2013 180 180 \u2013 Deferred tax liabilities (251) (6) 9 (180) (428) Net deferred tax (liabilities)/assets (249) (8) 9 \u2013 (248) 1. The movements through Acquisitions/disposals/transfers during the year reflect reclassifications only. The majority of these reclassifications relate to US deferred tax liabilities and net to \u00a3nil. 2. Deferred tax assets arising on deferred acquisition expenses relates solely to US balances as at 31 December 2022. 3. Trading losses consist solely of US operating losses (2021: \u00a3346m). The losses are not time restricted, and we expect to recover them over a period of 15 to 20 years, commensurate with the lifecycle of the underlying insurance contracts. In reaching this conclusion, we have considered past results, the different basis under which US companies are taxed, temporary differences that are expected to generate future profits against which the deferred tax can be offset, management actions, and future profit forecasts. The recoverability of deferred tax assets is routinely reviewed by management. 4. The deferred tax asset represents \u00a3168m of US unrealised losses on investments (2021: \u00a3nil), \u00a37m of UK unrealised losses on investments (2021: \u00a3nil) and \u00a35m of other US deferred tax assets (2021: \u00a3nil). These are not capable of being offset against any deferred tax liabilities or future trading profits. 30 Tax continued (ii) Deferred tax \u2013 Consolidated Balance Sheet continued Net tax liability as at 1 January 2021 \u00a3m Tax (charged)/ credited to the income statement \u00a3m Tax (charged)/ credited to OCI or equity \u00a3m Acquisitions/ disposals/ transfers1 \u00a3m Net tax liability as at 31 December 2021 \u00a3mDeferred tax (liabilities)/assets Deferred acquisition expenses 2 85 10 \u2013 \u2013 95 Difference between the tax and accounting value of insurance contracts (557) (135) (3) \u2013 (695) \u2013 UK (207) (58) (4) \u2013 (269) \u2013 Overseas (350) (77) 1 \u2013 (426) Realised and unrealised gains on investments1 (113) 23 \u2013 7 (83) Excess of depreciation over capital allowances 18 5 \u2013 (1) 22 Excess expenses 1 (1) \u2013 \u2013 \u2013 Accounting provisions and other1 54 1 \u2013 \u2013 55 Trading losses 3 289 60 \u2013 (1) 348 Pension fund deficit 22 (6) (7) \u2013 9 Acquired intangibles (1) 1 \u2013 \u2013 \u2013 Total net deferred tax (liabilities)/assets (202) (42) (10) 5 (249) Less: net deferred tax liabilities transferred on disposal 4 \u2013 5 \u2013 (5) \u2013 Net deferred tax (liabilities)/assets (202) (37) (10) \u2013 (249) Presented on the Consolidated Balance Sheet as: \u2013 Deferred tax assets 5 5 (3) \u2013 \u2013 2 \u2013 Deferred tax liabilities (207) (34) (10) \u2013 (251) Net deferred tax (liabilities)/assets (202) (37) (10) \u2013 (249) 1. The US deferred tax liability of \u00a3102m in respect of US bond contracts has been reclassified from Accounting provisions and other to Realised and unrealised gains on investments. The net impact on the total balance is \u00a3nil. 2. Deferred tax liabilities arising on deferred acquisition expenses relates solely to US balances as at 31 December 2021. 3. Trading losses include deferred tax on UK trade and US operating losses of \u00a32m (2020: \u00a35m) and \u00a3346m (2020: \u00a3284m) respectively. Overseas net deferred tax liabilities include a deferred tax asset of \u00a3346m (2020: \u00a3284m) on accumulated losses in our US insurance business. These losses are not time restricted, and we expect to recover them over a period of 15 to 20 years, commensurate with the lifecycle of the underlying insurance contracts. In reaching this conclusion, we have considered past results, the different basis under which US companies are taxed, temporary differences that are expected to generate future profits against which the deferred tax can be offset, management actions, and future profit forecasts. The recoverability of deferred tax assets is routinely reviewed by management. 4. Deferred tax assets and liabilities transferred on disposal relate to the deconsolidation of a number of subsidiaries following the Inspired Villages Group joint venture agreement with Natwest Group Pension Trustee Limited in August 2021. 5. The deferred tax asset recognised separately in the Consolidated Balance Sheet refers to deferred tax assets against which there are no appropriate deferred tax liabilities to offset the asset. The closing amount of \u00a32m (2020: \u00a35m) are restricted losses which cannot be offset against profits arising elsewhere in the group. Unrecognised deferred tax assets The group has the following unrelieved tax losses and deductible temporary differences carried forward as at 31 December 2022. No deferred tax asset has been recognised in respect of these as at 31 December 2022 (or 31 December 2021), as it is not probable that there will be suitable taxable profits emerging in future periods against which to relieve them. These tax assets will only be recognised if it becomes probable that suitable taxable profits will arise in future periods. Gross Tax Gross Tax 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Trading losses1 272 61 172 36 Capital losses 2 67 14 74 19 Excess management expense 9 2 9 2 Unrelieved interest payments on debt instruments 14 4 14 4 Unrecognised deferred tax assets 362 81 269 61 1. Gross trading losses includes \u00a3163m of UK trading losses (2021: \u00a361m), \u00a357m (2021: \u00a314m) related to the US business which are expected to expire between 2026 and 2032 and \u00a352m (2021: \u00a347m) related to other overseas jurisdictions. 2. Gross capital losses includes \u00a364m (2021: \u00a3nil) related to the US business. (iii) Current tax \u2013 Consolidated Balance Sheet 2022 2021 \u00a3m \u00a3m Tax recoverable within 12 months 52 46 Tax recoverable after 12 months 750 624 Current tax assets1 802 670 1. Of the total current tax asset \u00a3745m (2021: \u00a3619m) relates to amount recoverable in respect of withholding tax reclaims attributable to funds. 2022 2021 \u00a3m \u00a3m Tax due within 12 months 1 4 Tax due after 12 months 68 80 Current tax liabilities 69 84 (iv) Tax charged directly in equity 2022 2021 \u00a3m \u00a3m Current tax (6) 4 Deferred tax (7) (3) Tax (credit)/charge recognised directly in equity (13) 1 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-585": { "value": "31 Auditor\u2019s remuneration 2022 2021 \u00a3m \u00a3m Remuneration receivable by the company\u2019s auditors for the audit of the consolidated and company financial statements 3.0 1.5 Remuneration receivable by the company\u2019s auditors and its associates for the supply of other services to the company and its associates, including remuneration for the audit of the financial statements of the company\u2019s subsidiaries: The audit of the company\u2019s subsidiaries 11.2 7.8 Audit related assurance services \u2013 required by national or EU legislation 1.6 1.3 Audit related assurance services \u2013 other 0.9 1.2 Other assurance services 0.8 0.1 Total remuneration 17.5 11.9 ", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-586": { "value": "32 Employee information 2022 2021 Monthly average number of staff employed during the year: UK 10,333 9,705 USA 1,032 927 Europe 59 43 Other 74 66 Worldwide employees 11,498 10,741 2022 2021 Notes \u00a3m \u00a3m Wages and salaries 917 789 Social security costs 105 89 Share-based incentive awards 33 54 33 Defined benefit pension costs 23 25 21 Defined contribution pension costs 23 93 82 Total employee related expenses 1,194 1,014 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-587": { "value": "The fair value at the date of grant of the equity instrument is recognised as an expense, spread over the vesting period of the instrument. The total amount to be expensed is determined by reference to the fair value of the awards, excluding the impact of any non-market vesting conditions. At each balance sheet date, the group revises its estimate of the number of equity instruments which are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement and a corresponding adjustment is made to equity. On vesting or exercise, the difference between the expense charged to the income statement and the actual cost to the group is transferred to retained earnings. Where new shares are issued, the proceeds received are credited to share capital and share premium. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-588": { "value": "(i) Description of plans The group provides a number of equity settled share-based long-term incentive plans for directors and eligible employees. Nil Cost Options can be granted to senior managers under the Performance Share Plan (PSP), based upon individual and company performance. From 2014, the number of options that vest are equally dependent on the group\u2019s relative TSR and Earnings per Share (EPS)/Dividend per Share (DPS) growth. The awards vest after the end of the three year performance period and become exercisable in thirds over three, four and five years. Changes were made to the performance conditions for awards granted from 2018. The number of options that vest in respect of these awards is equally dependent on the group\u2019s relative TSR and EPS growth (subject to Solvency II objectives). The majority of awards vest after the end of the three year performance period and become exercisable in thirds in year three, four and five. Awards granted to Executive Directors and Persons Delivering Managerial Responsibilities vest after three years but any options that vest will not become exercisable until year five. The Share Bonus Plan (SBP) awards conditional shares, restricted shares, combined awards of CSOP options and restricted shares and combined awards of CSOP options and nil-paid options. Recipients of restricted shares are entitled to both vote and receive dividends. Fair value is calculated as the market value on the grant date, adjusted to reflect the eligibility for dividend payments. Conditional Share awards, which include awards to Executive Directors, do not have voting or dividend rights. Shares in respect of dividend equivalents will normally be awarded when Conditional Share awards vest. The savings related share option plan (ShareSave) allows employees to enter into a regular savings contract over three and/or five years, coupled with a corresponding option over shares of the group. The grant price is equal to 80% of the quoted market price of the group shares on the invitation date. Fair value is calculated using the Black-Scholes model. Under the HMRC tax-advantaged Employee Share Plan (ESP), UK employees may elect to purchase group shares from the market at the prevailing market price on a monthly basis. The group supplements the number of shares purchased by giving employees one free matching share for every one share purchased up to the first \u00a320 of the employees\u2019 contributions and one free matching share for every two shares purchased with contributions between \u00a320 and \u00a3125. There is currently no match on contributions between \u00a3125 and \u00a3150. From time to time, the group may make an award of free shares. Both the free and matching shares must be held in trust for three years. The fair value of awarded shares is equal to the market value on award date. The weighted average fair value of options and awards granted during the year, estimated by using Monte Carlo simulations were 61.7p and 169.5p for the ShareSave options and PSP awards respectively. The fair values of the share awards made during the year have been calculated using the following assumptions: ShareSave PSP Award date 8 April 2022 19 April 2022 Weighted average share price (pence) 268.8 271.1 Weighted average exercise price (pence) 205.0 N/A Expected volatility 34% 45% Expected life 3\u20135 years 3\u20135 years Risk-free investment rate 1.52%\u20131.55% 1.64% Dividend yield 6.3% 6.4% (ii) Total recognised expense The total recognised expense relating to share-based payments in 2022 was \u00a354m (2021: \u00a333m) before tax, all of which related to equity settled share schemes. This is broken down between the group\u2019s plans as detailed below: 2022 2021 \u00a3m \u00a3m Share Bonus Plan (SBP) 38 24 Performance Share Plan (PSP) 12 5 Employee Share Plan (ESP) 2 2 Savings related share option scheme (ShareSave) 2 2 Total share-based payment expense 54 33 (iii) Outstanding share options ShareSave options 2022 Weighted average exercise price 2022 p CSOP options 2022 Weighted average exercise price 2022 p SBP options 2022 Weighted average exercise price 2022 p Outstanding at 1 January 19,206,594 212 3,963,756 256 568,137 \u2013 Granted during the year 11,768,715 205 2,719,728 272 355,739 \u2013 Forfeited during the year (3,494,833) 219 \u2013 \u2013 \u2013 \u2013 Exercised during the year (2,837,683) 214 \u2013 \u2013 (4,008) \u2013 Expired during the year (658,933) 211 (1,169,981) 281 (122,750) \u2013 Outstanding at 31 December 23,983,860 207 5,513,503 258 797,118 \u2013 Exercisable at 31 December 3,151 217 \u2013 \u2013 139,804 \u2013 Weighted average remaining contractual life (years) 3 9 8 ShareSave options 2021 Weighted average exercise price 2021 p CSOP options 2021 Weighted average exercise price 2021 p SBP options 2021 Weighted average exercise price 2021 p Outstanding at 1 January 18,232,974 204 3,95 7,155 246 586,514 \u2013 Granted during the year 6,186,694 230 1,369,409 125 152,723 \u2013 Forfeited during the year (1,265,946) 212 \u2013 \u2013 \u2013 \u2013 Exercised during the year (3,057,038) 202 (1,089,506) 269 (134,231) \u2013 Expired during the year (890,090) 208 (273,302) 255 (36,869) \u2013 Outstanding at 31 December 19,206,594 212 3,963,756 256 568,137 \u2013 Exercisable at 31 December 12,969 194 \u2013 \u2013 52,410 \u2013 Weighted average remaining contractual life (years) 3 9 8 (iv) Total options Options over 30,294,481 shares (2021: 23,738,488 shares) are outstanding under CSOP, ShareSave and SBP as at 31 December 2022. These options have a range of exercise prices between 0p and 295p (2021: 0p and 295p) and maximum remaining contractual life up to 2032 (2021: 2031). ", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-623": { "value": "An equity instrument is any contract which evidences a residual interest in the net assets of an entity. It follows that a financial instrument is treated as equity if: \u2022 there is no contractual obligation to deliver cash or other financial assets or to exchange financial assets or liabilities on unfavourable terms; and \u2022 the instrument is either a non-derivative which contains no contractual obligation to deliver a variable number of own equity instruments, or is a derivative which will be settled only by the group exchanging a fixed amount of cash, or other financial assets, for a fixed number of its own equity instruments. Where any group entity purchases the company\u2019s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to shareholders. Where such shares are subsequently sold, reissued or otherwise disposed of, any consideration received is included in equity attributable to shareholders, net of any directly attributable incremental transaction costs and the related income tax effects. Shares held on behalf of employee share schemes are disclosed as such on the Consolidated Balance Sheet. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-589": { "value": "An equity instrument is any contract which evidences a residual interest in the net assets of an entity. It follows that a financial instrument is treated as equity if: \u2022 there is no contractual obligation to deliver cash or other financial assets or to exchange financial assets or liabilities on unfavourable terms; and \u2022 the instrument is either a non-derivative which contains no contractual obligation to deliver a variable number of own equity instruments, or is a derivative which will be settled only by the group exchanging a fixed amount of cash, or other financial assets, for a fixed number of its own equity instruments. Where any group entity purchases the company\u2019s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to shareholders. Where such shares are subsequently sold, reissued or otherwise disposed of, any consideration received is included in equity attributable to shareholders, net of any directly attributable incremental transaction costs and the related income tax effects. Shares held on behalf of employee share schemes are disclosed as such on the Consolidated Balance Sheet. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-624": { "value": "(i) Share capital and share premium 2022 2021 Number of 2022 Number of 2021 Authorised share capital shares \u00a3m shares \u00a3m At 31 December: ordinary shares of 2.5p each 9,200,000,000 230 9,200,000,000 230 Share Share Number of capital premium Issued share capital, fully paid shares \u00a3m \u00a3m As at 1 January 2022 5,970,415,817 149 1,012 Options exercised under share option schemes 2,837,683 \u2013 6 As at 31 December 2022 5,973,253,500 149 1,018 Share Share Number of capital premium Issued share capital, fully paid shares \u00a3m \u00a3m As at 1 January 2021 5,967,358,713 149 1,006 Options exercised under share option schemes 3,057,10 4 \u2013 6 As at 31 December 2021 5,970,415,817 149 1,012 There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights. The holders of the company\u2019s ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the company. (ii) Employee share plans The group uses the Employees\u2019 Share Ownership Trust (ESOT) and the Legal & General Group Employee Share Plan (ESP) to purchase and hold shares of the group for delivery to employees under various employee share plans. Shares owned by these vehicles are included at cost in the Consolidated Balance Sheet and are shown as a deduction from shareholders\u2019 equity. They are disclosed as employee plan shares until they vest to employees. Share-based liabilities to employees may also be settled via purchases directly from the market or by the issue of new shares. The ESOT has waived its voting rights and its rights to some of the dividends payable on the shares it holds. Employees are entitled to dividends on the shares held on their behalf within the ESP. 2022 2021 Number of 2022 Number of 2021 shares \u00a3m shares \u00a3m As at 1 January 42,700,058 99 35,306,671 75 Shares purchased 23,424,103 59 11,862,090 34 Shares vested (5,316,948) (14) (4,468,703) (10) As at 31 December 60,807,213 144 42,700,058 99 ", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-590": { "value": "(i) Share capital and share premium 2022 2021 Number of 2022 Number of 2021 Authorised share capital shares \u00a3m shares \u00a3m At 31 December: ordinary shares of 2.5p each 9,200,000,000 230 9,200,000,000 230 Share Share Number of capital premium Issued share capital, fully paid shares \u00a3m \u00a3m As at 1 January 2022 5,970,415,817 149 1,012 Options exercised under share option schemes 2,837,683 \u2013 6 As at 31 December 2022 5,973,253,500 149 1,018 Share Share Number of capital premium Issued share capital, fully paid shares \u00a3m \u00a3m As at 1 January 2021 5,967,358,713 149 1,006 Options exercised under share option schemes 3,057,10 4 \u2013 6 As at 31 December 2021 5,970,415,817 149 1,012 There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights. The holders of the company\u2019s ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the company. (ii) Employee share plans The group uses the Employees\u2019 Share Ownership Trust (ESOT) and the Legal & General Group Employee Share Plan (ESP) to purchase and hold shares of the group for delivery to employees under various employee share plans. Shares owned by these vehicles are included at cost in the Consolidated Balance Sheet and are shown as a deduction from shareholders\u2019 equity. They are disclosed as employee plan shares until they vest to employees. Share-based liabilities to employees may also be settled via purchases directly from the market or by the issue of new shares. The ESOT has waived its voting rights and its rights to some of the dividends payable on the shares it holds. Employees are entitled to dividends on the shares held on their behalf within the ESP. 2022 2021 Number of 2022 Number of 2021 shares \u00a3m shares \u00a3m As at 1 January 42,700,058 99 35,306,671 75 Shares purchased 23,424,103 59 11,862,090 34 Shares vested (5,316,948) (14) (4,468,703) (10) As at 31 December 60,807,213 144 42,700,058 99 ", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-591": { "value": "35 Restricted Tier 1 convertible notes On 24 June 2020, Legal & General Group Plc issued \u00a3500m of 5.625% perpetual restricted Tier 1 contingent convertible notes. The notes are callable at par between 24 March 2031 and 24 September 2031 (the First Reset Date) inclusive and every 5 years after the First Reset Date. If not called, the coupon from 24 September 2031 will be reset to the prevailing five year benchmark gilt yield plus 5.378%. The notes have no fixed maturity date. Optional cancellation of coupon payments is at the discretion of the issuer and mandatory cancellation is upon the occurrence of certain conditions. The Tier 1 notes are therefore treated as equity and coupon payments are recognised directly in equity. During the year coupon payments of \u00a328m were made (2021: \u00a328m). The notes rank junior to all other liabilities and senior to equity attributable to shareholders. On the occurrence of certain conversion trigger events the notes are convertible into ordinary shares of the issuer at the prevailing conversion price. The notes are treated as restricted Tier 1 own funds for Solvency II purposes. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfRestrictedTier1ConvertibleNotes", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-592": { "value": "36 Non-controlling interests Non-controlling interests represent third party interests in direct equity investments, including private equity, which are consolidated in the group\u2019s results. As at 31 December 2022, non-controlling interests primarily represent third party ownership in Thorpe Park Holdings, a mixed residential/commercial retail space in which the group holds 50%. ", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-593": { "value": "37 Other liabilities 2022 2021 \u00a3m \u00a3m Accruals 517 454 Deferred income 40 26 Other 166 445 Total other liabilities 723 925 Due within 12 months 668 887 Due after 12 months 55 38 ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-594": { "value": "38 Reconciliation of assets under management to the Consolidated Balance Sheet 2022 2021 \u00a3bn \u00a3bn Assets under management 1 1,196 1,421 Derivative notionals1,2 (337) (383) Third party assets 1,3 (412) (480) Other 1,4 44 7 Total financial investments, investment property and cash and cash equivalents 491 565 1. These balances are unaudited. 2. Derivative notionals are included in the assets under management measure but are not for IFRS reporting and are thus removed. 3. Third party assets are those that LGIM manage on behalf of others which are not included on the group\u2019s Consolidated Balance Sheet. 4. Other includes assets that are managed by third parties on behalf of the group, other assets and liabilities related to financial investments, derivative assets and pooled funds. ", "dimensions": { "concept": "legalandgeneral:DisclosureOfReconciliationOfAssetsUnderManagementToConsolidatedBalanceSheet", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-625": { "value": "39 Related party transactions (i) Key management personnel transactions and compensation All transactions between the group and its key management are on commercial terms which are no more favourable than those available to employees in general. There were no material transactions between key management and the Legal & General group of companies during the year. Contributions to the post-employment defined benefit plans were \u00a3105m (31 December 2021: \u00a3109m) for all employees. At 31 December 2022 and 31 December 2021 there were no loans outstanding to officers of the company. The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows: 2022 2021 \u00a3m \u00a3m Salaries 11 10 Share-based incentive awards 6 5 Key management personnel compensation 17 15 (ii) Services provided to and by related parties All transactions between the group and associates, joint ventures and other related parties during the year are on commercial terms which are no more favourable than those available to companies in general. The group has entered into the following material related party transactions during the year: \u2022 Annuity contracts issued by Legal and General Assurance Society Limited (LGAS), a group company, for consideration of \u00a361m (2021: \u00a382m) have been purchased by the group\u2019s UK defined benefit pension schemes, priced on an arm\u2019s length basis; and \u2022 The Legal & General Group UK Pension and Assurance Fund (the Fund) and the Legal & General Group UK Senior Pension Scheme (the Scheme) completed an Assured Payment Policy (APP) transaction with LGAS including \u00a383m of top-ups in 2022 under the existing contracts. An APP is an investment contract product sold by LGRI which, issued to a pension scheme, provides the scheme with a fixed or inflation linked schedule of payments to match the scheme\u2019s expected liabilities. As at 31 December 2022, LGAS recognised a liability related to this APP transaction with the Fund and Scheme of \u00a3820m (2021: \u00a31,214m) which is included in the group\u2019s non-participating investment contract liabilities. The UK defined benefit pension schemes hold transferable plan assets of the same amounts, which do not eliminate on consolidation. Loans and commitments to related parties are made in the normal course of business. As at 31 December 2022, the group had: \u2022 Loans outstanding from related parties of \u00a358m (2021: \u00a315m), with a further commitment of \u00a36m; and \u2022 Total other commitments of \u00a31,265m to related parties (2021: \u00a31,158m), of which \u00a31,010m has been drawn at 31 December 2022 (2021: \u00a3726m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfTransactionsBetweenRelatedPartiesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-595": { "value": "39 Related party transactions (i) Key management personnel transactions and compensation All transactions between the group and its key management are on commercial terms which are no more favourable than those available to employees in general. There were no material transactions between key management and the Legal & General group of companies during the year. Contributions to the post-employment defined benefit plans were \u00a3105m (31 December 2021: \u00a3109m) for all employees. At 31 December 2022 and 31 December 2021 there were no loans outstanding to officers of the company. The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows: 2022 2021 \u00a3m \u00a3m Salaries 11 10 Share-based incentive awards 6 5 Key management personnel compensation 17 15 (ii) Services provided to and by related parties All transactions between the group and associates, joint ventures and other related parties during the year are on commercial terms which are no more favourable than those available to companies in general. The group has entered into the following material related party transactions during the year: \u2022 Annuity contracts issued by Legal and General Assurance Society Limited (LGAS), a group company, for consideration of \u00a361m (2021: \u00a382m) have been purchased by the group\u2019s UK defined benefit pension schemes, priced on an arm\u2019s length basis; and \u2022 The Legal & General Group UK Pension and Assurance Fund (the Fund) and the Legal & General Group UK Senior Pension Scheme (the Scheme) completed an Assured Payment Policy (APP) transaction with LGAS including \u00a383m of top-ups in 2022 under the existing contracts. An APP is an investment contract product sold by LGRI which, issued to a pension scheme, provides the scheme with a fixed or inflation linked schedule of payments to match the scheme\u2019s expected liabilities. As at 31 December 2022, LGAS recognised a liability related to this APP transaction with the Fund and Scheme of \u00a3820m (2021: \u00a31,214m) which is included in the group\u2019s non-participating investment contract liabilities. The UK defined benefit pension schemes hold transferable plan assets of the same amounts, which do not eliminate on consolidation. Loans and commitments to related parties are made in the normal course of business. As at 31 December 2022, the group had: \u2022 Loans outstanding from related parties of \u00a358m (2021: \u00a315m), with a further commitment of \u00a36m; and \u2022 Total other commitments of \u00a31,265m to related parties (2021: \u00a31,158m), of which \u00a31,010m has been drawn at 31 December 2022 (2021: \u00a3726m). ", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-634": { "value": "(i) Key management personnel transactions and compensation All transactions between the group and its key management are on commercial terms which are no more favourable than those available to employees in general. There were no material transactions between key management and the Legal & General group of companies during the year. Contributions to the post-employment defined benefit plans were \u00a3105m (31 December 2021: \u00a3109m) for all employees. At 31 December 2022 and 31 December 2021 there were no loans outstanding to officers of the company. The aggregate compensation for key management personnel, including executive and non-executive directors, is as follows: 2022 2021 \u00a3m \u00a3m Salaries 11 10 Share-based incentive awards 6 5 Key management personnel compensation 17 15 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-626": { "value": "40 Contingent liabilities, guarantees and indemnities Provision for the liabilities arising under contracts with policyholders is based on certain assumptions. The variance between actual experience from that assumed may result in those liabilities differing from the provisions made for them. Liabilities may also arise in respect of claims relating to the interpretation of policyholder contracts, or the circumstances in which policyholders have entered into them. The extent of these liabilities is influenced by a number of factors including the actions and requirements of the PRA, FCA, ombudsman rulings, industry compensation schemes and court judgments. Various group companies receive claims and become involved in actual or threatened litigation and regulatory issues from time to time. The relevant members of the group ensure that they make prudent provision as and when circumstances calling for such provision become clear, and that each has adequate capital and reserves to meet reasonably foreseeable eventualities. The provisions made are regularly reviewed. It is not possible to predict, with certainty, the extent and the timing of the financial impact of these claims, litigation or issues. Group companies have given warranties, indemnities and guarantees as a normal part of their business and operating activities or in relation to capital market transactions or corporate disposals. Legal & General Group Plc has provided indemnities and guarantees in respect of the liabilities of group companies in support of their business activities including Pension Protection Fund compliant guarantees in respect of certain group companies\u2019 liabilities under the group pension Fund and Scheme. Legal and General Assurance Society Limited has provided indemnities, a liquidity and expense risk agreement, a deed of support and a cash and securities liquidity facility in respect of the liabilities of group companies to facilitate the group\u2019s matching adjustment reorganisation pursuant to Solvency II. ", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-596": { "value": "40 Contingent liabilities, guarantees and indemnities Provision for the liabilities arising under contracts with policyholders is based on certain assumptions. The variance between actual experience from that assumed may result in those liabilities differing from the provisions made for them. Liabilities may also arise in respect of claims relating to the interpretation of policyholder contracts, or the circumstances in which policyholders have entered into them. The extent of these liabilities is influenced by a number of factors including the actions and requirements of the PRA, FCA, ombudsman rulings, industry compensation schemes and court judgments. Various group companies receive claims and become involved in actual or threatened litigation and regulatory issues from time to time. The relevant members of the group ensure that they make prudent provision as and when circumstances calling for such provision become clear, and that each has adequate capital and reserves to meet reasonably foreseeable eventualities. The provisions made are regularly reviewed. It is not possible to predict, with certainty, the extent and the timing of the financial impact of these claims, litigation or issues. Group companies have given warranties, indemnities and guarantees as a normal part of their business and operating activities or in relation to capital market transactions or corporate disposals. Legal & General Group Plc has provided indemnities and guarantees in respect of the liabilities of group companies in support of their business activities including Pension Protection Fund compliant guarantees in respect of certain group companies\u2019 liabilities under the group pension Fund and Scheme. Legal and General Assurance Society Limited has provided indemnities, a liquidity and expense risk agreement, a deed of support and a cash and securities liquidity facility in respect of the liabilities of group companies to facilitate the group\u2019s matching adjustment reorganisation pursuant to Solvency II. 41 Commitments (i) Capital commitments 2022 2021 \u00a3m \u00a3m Authorised and contracted commitments not provided for in respect of investment property development, payable after 31 December: \u2013 Long-term business 640 680 (ii) Lease commitment receivable \u2013 payments to be received under operating leases Under certain lease agreements, the group, as the lessor, is considered to substantially retain all the risks and reward of ownership of the underlying asset, therefore these contracts have been classified as operating leases. The future undiscounted minimum lease payments under such arrangements are disclosed below: Total Total future future payments payments 2022 2021 \u00a3m \u00a3m Within 1 year 392 342 1-2 years 374 330 2-3 years 360 311 3-4 years 347 298 4-5 years 334 287 After 5 years 4,110 3,391 Total lease commitment receivable 5,917 4,959 Lease commitments payable are disclosed as part of the lease disclosure in Note 25. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-627": { "value": "41 Commitments (i) Capital commitments 2022 2021 \u00a3m \u00a3m Authorised and contracted commitments not provided for in respect of investment property development, payable after 31 December: \u2013 Long-term business 640 680 (ii) Lease commitment receivable \u2013 payments to be received under operating leases Under certain lease agreements, the group, as the lessor, is considered to substantially retain all the risks and reward of ownership of the underlying asset, therefore these contracts have been classified as operating leases. The future undiscounted minimum lease payments under such arrangements are disclosed below: Total Total future future payments payments 2022 2021 \u00a3m \u00a3m Within 1 year 392 342 1-2 years 374 330 2-3 years 360 311 3-4 years 347 298 4-5 years 334 287 After 5 years 4,110 3,391 Total lease commitment receivable 5,917 4,959 Lease commitments payable are disclosed as part of the lease disclosure in Note 25. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-635": { "value": "Under certain lease agreements, the group, as the lessor, is considered to substantially retain all the risks and reward of ownership of the underlying asset, therefore these contracts have been classified as operating leases. ", "dimensions": { "concept": "legalandgeneral:DescriptionOfAccountingPolicyForCommitments", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-597": { "value": "The Companies Act 2006 requires disclosure of information about the group\u2019s subsidiaries, associates, joint ventures and other significant holdings. A complete list of the group\u2019s subsidiaries, associates, joint ventures and significant holdings is provided in Notes 42 and 43. Subsidiaries are those entities (including special purpose entities, mutual funds and unit trusts) over which the group directly or indirectly has the power to govern the operating and financial policies in order to gain economic benefits. Profits or losses of subsidiary undertakings sold or acquired during the year are included in the consolidated results up to the date of disposal or from the date of gaining control. The interests of parties, other than the group, in investment vehicles, such as unit trusts, are classified as liabilities and appear as \u2018Net asset value attributable to unit holders\u2019 in the Consolidated Balance Sheet. The basis by which subsidiaries are consolidated in the group financial statements is outlined in the Basis of preparation (Note 1). ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-598": { "value": "The particulars of the company\u2019s subsidiaries, mutual funds and partnerships that have been consolidated as at 31 December 2022 are listed below. The main territory of operation of subsidiaries incorporated in England and Wales is the UK. For overseas subsidiaries the principal country of operation is the same as the country of incorporation. All subsidiaries have a 31 December year end reporting date and are 100% owned, unless stated otherwise. The registered office of all subsidiaries in England and Wales is One Coleman Street, London EC2R 5AA, United Kingdom, and in Ireland is Dillon Eustace, 33 Sir John Rogerson\u2019s Quay, Dublin 2, Ireland, unless otherwise noted. All subsidiaries are held through intermediate holding companies unless noted that they are held direct by the company. Subsidiaries that are consolidated where the group owns less than 50% of the ordinary share capital, are consolidated based on an assessment of control normally arising from special rights attaching to the class of share owned, other contractual arrangements and factors such as the purpose of the investee, the nature of its relevant activities, voting rights (including potential voting rights) and substantive and protective rights. The group reassesses the appropriateness of the consolidation of an investee whenever facts and circumstances indicate that there has been a change in the relationship between the group and the investee which affects control. 42 Subsidiaries continued Year end % of equity reporting shares held Company name Nature of business Share class date by the group Country of incorporation: Bermuda First British Bermuda Reinsurance Company III Limited 1 Reinsurance Ordinary 31\u2013Dec 100.0 Legal & General America Reinsurance Limited2 Reinsurance Ordinary 31\u2013Dec 100.0 Legal & General Reinsurance Company Limited 2 Reinsurance Ordinary 31\u2013Dec 100.0 Legal & General Reinsurance Company No.2 Limited2 Reinsurance Ordinary 31\u2013Dec 100.0 Legal & General Resources Bermuda Limited 2 Provision of services Ordinary 31\u2013Dec 100.0 Country of incorporation: China Legal & General Business Consulting (Shanghai) Limited 3 Business information consultancy Ownership dictated by subscribed capital 31\u2013Dec 100.0 Country of incorporation: England and Wales 245 Hammersmith Road (General Partner) Limited General partner Partnership 31\u2013Dec 50.0 245 Hammersmith Road Nominee 1 Limited Dormant company Ordinary 31\u2013Dec 50.0 245 Hammersmith Road Nominee 2 Limited Dormant company Ordinary 31\u2013Dec 50.0 245 HR GP LLP Limited liability partnership Partnership 31\u2013Dec 50.0 Accelerated Digital Ventures Limited Activities of venture and development capital companies Ordinary 31\u2013Dec 100.0 ADV (GP) LLP Limited liability partnership Partnership 31\u2013Dec 100.0 ADV ECF LP Limited partnership Partnership 31\u2013Dec 100.0 ADV Management Limited Fund management activities Ordinary 31\u2013Dec 100.0 ADV Nominees Limited Activities of venture and development capital companies Ordinary 31\u2013Dec 100.0 Antham 1 Limited Investment vehicle Ordinary 31\u2013Dec 100.0 Atelier Management Company Limited ECF Manco4 Ordinary 31\u2013May \u2013 Banner (Spare) Limited 5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Construction Limited 5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Developments Limited 5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Freehold Limited 5 Letting and operating of leased real estate Ordinary 31\u2013Dec 100.0 Banner Homes Bentley Priory Limited 5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Homes Central Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Homes Group Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Homes Limited 5 Dormant company Ordinary 31\u2013Dec 100.0 Banner Homes Midlands Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Homes Southern Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Homes Ventures Limited 5 Domestic building construction Ordinary 31\u2013Dec 100.0 Banner Management Limited 5 Domestic building construction Ordinary 31\u2013Dec 100.0 Begbroke Oxford Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0 BQN Limited Development of building projects Ordinary 31\u2013Dec 100.0 BTR Core Limited Investment vehicle Ordinary 31\u2013Dec 100.0 BTR Residential Development Company Limited Development of building projects Ordinary 31\u2013Dec 100.0 Bucklers Park Estate Management Company Limited Management of real estate Limited by guarantee 31\u2013May 100.0 C1 Plot Management Company Limited Residential property management Limited by guarantee 31\u2013Dec 33.3 CALA (ESOP) Trustees Limited 5 Financial intermediation Ordinary 31\u2013Dec 100.0 CALA 1 Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Group (Holdings) Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes (Chiltern) Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes (Midlands) Limited 5 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes (North Home Counties) Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes (South Home Counties) Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes (Southern) Limited 5 Non-trading company Ordinary 31\u2013Dec 100.0 CALA Homes (Thames) Limited 5 Non-trading company Ordinary 31\u2013Dec 100.0 CALA Homes (Yorkshire) Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Properties Banbury Limited5 Dormant company Ordinary 31\u2013Dec 100.0 Cardiff Interchange Limited Development of building projects Ordinary 31\u2013Dec 100.0 Cardiff Interchange ManCo Limited Management company Ordinary 31\u2013Jan 25.0 Year end % of equity reporting shares held Company name Nature of business Share class date by the group Care Secured Limited 5 Dormant company Ordinary 31\u2013Dec 100.0 City & Urban Developments Limited Holding company Ordinary 31\u2013Dec 100.0 Court Place Gardens Holdings LLP Holding company Partnership 31\u2013Dec 100.0 Court Place Gardens Oxford Limited Activities of other holding companies not elsewhere classified Ordinary 31\u2013Dec 100.0 Cross Trees Park (Shrivenham) Management Company Limited Residential property management Limited by guarantee 31\u2013Dec 100.0 Euro Liquidity Fund OEIC 6 Ordinary 31\u2013Dec 47.1 Finchwood Park Management Company Limited Residential property management Limited by guarantee 31\u2013Dec 100.0 Finovation UK Limited Dormant company Ordinary 31\u2013Dec 100.0 Haut Investments 2 Limited Holding company Ordinary 31\u2013Dec 100.0 Haut Investments Limited Holding company Ordinary 30\u2013Dec 100.0 Hockley Mills UK BTR Limited Partnership Private fund limited partnership Partnership 31\u2013Dec \u2013 Inspired Villages Group Limited Activities of other holding companies not elsewhere classified Ordinary 31\u2013Dec 46.5 Interchange Central Square (General Partner) Limited General partner Partnership 31\u2013Dec 100.0 Interchange Central Square Limited Partnership Limited liability partnership Partnership 31\u2013Dec 100.0 Investment Discounts On Line Limited Insurance agents and brokers Ordinary 31\u2013Dec 100.0 IPIF Trade General Partner Limited Fund general partner Partnership 31\u2013Dec 100.0 IPIF Trade Nominee Limited Nominee Ordinary 31\u2013Dec 100.0 IVG Managers Limited 7 Dormant company Ordinary 31\u2013Dec 46.5 IVG Millbrook LLP7 Dormant company Partnership 31\u2013Dec 46.5 IXDS Limited Other information technology services Ordinary 31\u2013Dec 70.0 Jimcourt Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 L&G Bristol Temple Island Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0 L&G Cash Trust Unit trust Unit 05\u2013Feb 52.6 L&G Future World ESG Asia Pacific Index Fund Unit trust Unit 30\u2013Sep 69.8 L&G Future World ESG Emerging Markets Index Fund Unit trust Unit 30\u2013Sep 56.4 L&G Future World ESG Europe ex UK Index Fund Unit trust Unit 30\u2013Sep 80.0 L&G Future World ESG Japan Index Fund Unit trust Unit 30\u2013Sep 71.6 L&G Future World ESG Multi-Index 6 Fund Unit trust Unit 15\u2013Feb 42.5 L&G Future World ESG Multi-Index 7 Fund Unit trust Unit 15\u2013Feb 56.2 L&G Future World ESG North America Index Fund Unit trust Unit 30\u2013Sep 94.0 L&G Future World ESG UK Index Fund Unit trust Unit 30\u2013Sep 51.6 L&G Future World Sustainable Global Equity Focus Unit trust Unit 15\u2013May 99.9 L&G Future World Sustainable Opportunities Unit trust Unit 30\u2013Sep 88.2 L&G Global Developed Four Factor Scientific Beta Index Fund Authorised contractual schemes Ordinary 31\u2013Dec 31.4 L&G Homes Modular JV Holdco Limited Development of modular housing Ordinary 31\u2013Dec 100.0 L&G Multi-Asset Target Return Fund Unit trust Unit 14\u2013Apr 41.5 Legal & General (Portfolio Management Services) Limited Institutional fund management Ordinary 31\u2013Dec 100.0 Legal & General (Portfolio Management Services) Nominees Limited Dormant company Ordinary 31\u2013Dec 100.0 Legal & General (Residential) Holdco Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General (Strategic Land Harpenden) Limited Activities of other holding companies not elsewhere classified Ordinary 31\u2013Dec 100.0 Legal & General (Strategic Land North Horsham) Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General (Strategic Land) Limited Holding company Ordinary 31\u2013Dec 100.0 1. Registered office: Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda 2. Registered office: 19 Par-La-Ville Road, Hamilton, HM11, Bermuda 3. Registered office: Southwest ROOM, Floor 3, No. 2123 Pudong Avenue, China (Shanghai) Pilot Free Trade Zone (Bonded Area), Pudong District, Shanghai 4. English Cities Fund Management Company 5. Registered office: Cala House, 54 The Causeway, Surrey, TW18 3AX 6. Open Ended Investment Company 7. Registered office: Unit 3 Edwalton Business Park, Landmere Lane, Edwalton, Nottingham, United Kingdom, NG12 4JL 42 Subsidiaries continued Year end % of equity reporting shares held Company name Nature of business Share class date by the group Legal & General (Unit Trust Managers) Limited Unit trust management Ordinary 31\u2013Dec 100.0 Legal & General (Unit Trust Managers) Nominees Limited Non-trading company Ordinary 31\u2013Dec 100.0 Legal & General Affordable Homes (AR) LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General Affordable Homes (Capital) Limited Dormant company Ordinary 31\u2013Dec 100.0 Legal & General Affordable Homes (Development 2) Limited Domestic building construction Ordinary 31\u2013Dec 100.0 Legal & General Affordable Homes (Development 3) Limited Domestic building construction Ordinary 31\u2013Dec 100.0 Legal & General Affordable Homes (Development) Limited Domestic building construction Ordinary 31\u2013Dec 100.0 Legal & General Affordable Homes (Operations) Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General Affordable Homes (SO) LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General Affordable Homes Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General BTR Investment Nominee Limited Limited company Ordinary 30\u2013Sep 100.0 Legal & General Capital Investments Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Co Sec Limited Dormant company Ordinary 31\u2013Dec 100.0 Legal & General Development Assets Holdings Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Digital Solutions Limited Technology services Ordinary 31\u2013Dec 100.0 Legal & General Employee Benefits Administration Limited Non-trading company Ordinary 31\u2013Dec 100.0 Legal & General Estate Agencies Limited Management of dilapidation liabilities Ordinary 31\u2013Dec 100.0 Legal & General Euro Mortgage No.1 SPV Limited Special purpose vehicle Ordinary 31\u2013Dec 100.0 Legal & General Finance PLC Treasury operations Ordinary 31\u2013Dec 100.0 Legal & General Financial Advice Limited Provision of services Ordinary 31\u2013Dec 100.0 Legal & General FX Structuring (SPV) Limited Special purpose vehicle Ordinary 31\u2013Dec 100.0 Legal & General GP LLP Development of building projects Partnership 31\u2013Dec 100.0 Legal & General Holdings No.2 Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Home Finance Administration Services Limited Provision of services Ordinary 31\u2013Dec 100.0 Legal & General Home Finance Holding Company Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Home Finance Limited Mortgage finance companies Ordinary 31\u2013Dec 100.0 Legal & General Homes (Services Co) Limited Human resource management Ordinary 31\u2013Dec 100.0 Legal & General Homes Communities (Arborfield) Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General Homes Communities (Crowthorne) Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General Homes Communities (Didcot) Limited Other specialised construction activities not elsewhere classified Ordinary 31\u2013Dec 100.0 Legal & General Homes Communities (Shrivenham) Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General Homes Communities Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General Homes Holdings Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Homes Modular JV Limited Development of modular housing Ordinary 31\u2013Dec 100.0 Legal & General Homes Modular Limited Development of modular housing Ordinary 31\u2013Dec 100.0 Legal & General Insurance Holdings Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Insurance Holdings No. 2 Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Investment Management (Holdings) Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Investment Management Funds ICVC OEIC 6 Ordinary 31\u2013Dec 100.0 Legal & General Investment Management Limited Institutional fund management Ordinary 31\u2013Dec 100.0 Legal & General Later Living Limited Holding company Ordinary 31\u2013Oct 100.0 Legal & General Leisure Fund Trustee Limited Trustee Ordinary 31\u2013Dec 100.0 Legal & General LTM Structuring (SPV) Limited Special purpose vehicle Ordinary 31\u2013Dec 100.0 Legal & General Middle East Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Overseas Operations Limited Holding company Ordinary 31\u2013Dec 100.0 Year end % of equity reporting shares held Company name Nature of business Share class date by the group Legal & General Partnership Holdings Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Partnership Services Limited Provision of services Ordinary 31\u2013Dec 100.0 Legal & General Pension Fund Trustee Limited Dormant company Ordinary 31\u2013Dec 100.0 Legal & General Pension Scheme Trustee Limited Dormant company Ordinary 31\u2013Dec 100.0 Legal & General Pensions Limited Limited company Ordinary 31\u2013Dec 100.0 Legal & General Property Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (Industrial Fund) Limited General partner Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (Industrial) Nominees Limited Nominee Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (IPIF GP) LLP General partner Partnership 31\u2013Dec 100.0 Legal & General Property Partners (Leisure GP) LLP General partner Partnership 31\u2013Dec 100.0 Legal & General Property Partners (Leisure) Limited General partner Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (Life Fund) Limited Investment vehicle Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (Life Fund) Nominee Limited Investment vehicle Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (UK PIF) Limited General partner Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (UKPIF Geared Two) Limited Investment in UK real estate Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (UK PIF Geared) Limited General partner Ordinary 31\u2013Dec 100.0 Legal & General Property Partners (UKPIF Two) Limited Investment in UK real estate Ordinary 31\u2013Dec 100.0 Legal & General Re Holdings Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Residential (BTR) 1 LLP Investment management Partnership 31\u2013Dec 100.0 Legal & General Residential (BTR) 2 LLP Investment management Partnership 31\u2013Dec 100.0 Legal & General Resources Limited Provision of services Ordinary 31\u2013Dec 100.0 Legal & General Retail Investments (Holdings) Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Science and Tech (Holdings) Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Senior Living Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General Suburban BTR (Development 2) Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General Suburban BTR (Development) Limited Domestic building construction Ordinary 31\u2013Dec 100.0 Legal & General Suburban BTR (Operations) Limited Development of building projects Ordinary 31\u2013Dec 100.0 Legal & General Suburban BTR (Property) LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General Surveying Services Limited Provision of services Ordinary 31\u2013Dec 100.0 Legal & General Trustees Limited Fund trustee Ordinary 31\u2013Dec 100.0 Legal & General UK BTR GP Five LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General UK BTR GP Four LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General UK BTR GP LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General UK BTR GP Six LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General UK BTR GP Three LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General UK BTR Investment GP LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal & General UK BTR Investment LP Limited partnership Partnership 31\u2013Dec 100.0 Legal & General UK BTR Investment Nominee Limited Fund management activities Ordinary 31\u2013Dec 100.0 Legal & General UK Solar Investments (Holdings) Limited Holding company Ordinary 31\u2013Dec 100.0 Legal & General UKPIF Two GP LLP Limited liability partnership Partnership 31\u2013Dec 100.0 Legal and General Assurance (Pensions Management) Limited Insurance Ordinary 31\u2013Dec 100.0 Legal and General Assurance Society Limited Long-term and general insurance Ordinary 31\u2013Dec 100.0 Legal and General Capital IM Company Limited Fund management activities Ordinary 31\u2013Dec 100.0 LGC Overseas Holdco Limited Activities of other holding companies not elsewhere classified Ordinary 31\u2013Dec 100.0 6. Open Ended Investment Company LGC TEP UK Holdco Limited Activities of construction holding companies Ordinary 31\u2013Dec 100.0 LGCP Nominee 1 Limited Activities of other holding companies not elsewhere classified Ordinary 31\u2013Dec 100.0 LGIM Commercial Lending Limited Commercial lending Ordinary 31\u2013Dec 100.0 LGIM International Limited Institutional fund management Ordinary 31\u2013Dec 100.0 LGIM OEIC Corporate Bond Fund OEIC 6 Ordinary 31\u2013Dec 33.8 LGIM Real Assets (Operator) Limited Development of building projects Ordinary 31\u2013Dec 100.0 LGIM Real Assets Limited Development of building projects Ordinary 31\u2013Dec 100.0 LGP Newco Limited Dormant company Ordinary 31\u2013Dec 100.0 LGPL No 2 Limited Fund management activities Ordinary 30\u2013Sep 100.0 Life and Mind Building Oxford Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0 Maltby Street Properties Limited Investment property holding company Ordinary 31\u2013Dec 11.1 Millbay Estate Management Company Limited 8 Non-trading company Limited by guarantee 31\u2013Dec \u2013 Novella Building Management Company Limited ECF Manco4 Ordinary 3\u2013Mar \u2013 NSC Building A Limited Real estate trading Ordinary 31\u2013Dec 100.0 NSC Building B Limited Real estate trading Ordinary 31\u2013Dec 100.0 Portholme Residents Management Company Limited Resident property management Ordinary 30\u2013Nov 100.0 Rowley Lane Borehamwood Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0 Sapphire Campus Management Company Limited Investment vehicle Ordinary 31\u2013Dec 9.5 Senior Living Medici Holdco Limited 9 Dormant company Ordinary 31\u2013Dec 100.0 Senior Living Medici Limited 9 Dormant company Ordinary 31\u2013Dec 100.0 Senior Living Urban (Bath) Limited Buying and selling of own real estate Ordinary 31\u2013Oct 100.0 Senior Living Urban (Epsom) Limited Buying and selling of own real estate Ordinary 31\u2013Dec 100.0 Senior Living Urban (Uxbridge) Limited Buying and selling of own real estate Ordinary 31\u2013Oct 100.0 Senior Living Urban (Walton) Limited Buying and selling of own real estate Ordinary 31\u2013Dec 100.0 SMART Pension Limited10 Other information service activities not elsewhere classified Unit 31\u2013Mar 7.5 Stratford City Offices (No. 2) General Partner Limited General partner Partnership 31\u2013Dec 100.0 Stratford City Offices (No. 2) Limited Partnership Limited partnership Partnership 31\u2013Dec 100.0 Stratford City Offices Jersey Unit Trust (No. 2) Unit trust Ordinary 31\u2013Dec 99.8 Sunderland Vaux 1 Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0 Swindon (The Hub) Management Company Limited11 Management of real estate Ordinary 31\u2013Mar 82.8 The Advantage Collection Limited5 Domestic building construction Ordinary 31\u2013Dec 100.0 Thorpe Park 3175 Limited12 Buying and selling of own real estate Ordinary 31\u2013Dec 50.0 Thorpe Park A2 Limited12 Other letting and operating of own or leased real estate Ordinary 31\u2013Dec 50.0 Thorpe Park Developments Limited 12 Property development company Ordinary 31\u2013Dec 50.0 Thorpe Park Holdings Limited12 Holding company Ordinary 31\u2013Dec 50.0 Tower Works UK BTR Limited Partnership Private fund limited partnership Partnership 31\u2013Dec \u2013 TP Property Services Limited 12 Property services Ordinary 31\u2013Dec 50.0 Valette Square Management Company Limited Other service activities not elsewhere classified Ordinary 30\u2013Nov 33.0 Venturemarket.org Limited Activities of venture and development capital companies Ordinary 31\u2013Dec 100.0 West Bar Square Limited Construction of commercial buildings Ordinary 31\u2013Dec 100.0 Country of incorporation: Hong Kong Legal & General Investment Management Asia Limited 13 Investment management Ordinary 31\u2013Dec 100.0 Country of incorporation: Ireland Finovation Limited 14 Pension tracing and transfer service Ordinary and convertible 31\u2013Dec 100.0 L&G Asia Pacific ex Japan Equity Index Fund ICAV 15 Ordinary 31\u2013Dec 29.2 L&G Frontier Markets Equity Fund ICAV 15 Ordinary 31\u2013Dec 51.1 L&G Future World Global Credit Fund \u2013 UK QIAIF 16 Ordinary 31\u2013Dec 100.0 L&G LFST Alternative Assets Fund QAIF ICAV17 Ordinary 31\u2013Dec 47.4 L&G Multi Asset Core 20 Fund Unit trust Unit 15\u2013May 88.1 42 Subsidiaries continued Year end % of equity reporting shares held Company name Nature of business Share class date by the group L&G Multi Asset Core 45 Fund Unit trust Unit 15\u2013May 82.7 L&G Multi Asset Core 75 Fund Unit trust Unit 15\u2013May 84.0 L&G Net Zero Sterling Corporate Bond Fund QIAIF16 Ordinary 31\u2013Dec 25.0 Legal & General Fund Managers (Ireland) Limited18 Institutional fund management Ordinary 31\u2013Dec 100.0 Legal & General QIAIF ICAV19 QIAIF16 Ordinary 31\u2013Dec 100.0 Legal & General UCITS Managers (Ireland) Limited Institutional fund management Ordinary 31\u2013Dec 100.0 LGIM (Ireland) Risk Management Solutions Plc Management company Ordinary 31\u2013Dec 100.0 LGIM 2024 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2025 Fixed Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2025 Inflation Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2025 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2030 Fixed Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2030 Inflation Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2030 Leverage Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2030 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2034 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2035 Fixed Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2035 Inflation Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2035 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2037 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2038 Leveraged Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2040 Fixed Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2040 Inflation Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2040 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2040 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2042 Leveraged Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2042 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2045 Fixed Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2045 Inflation Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2045 Leveraged Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2045 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2047 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2049 Leveraged Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2050 Fixed Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2050 Inflation Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2050 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2050 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2055 Fixed Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2055 Leveraged Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2055 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2055 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2060 Fixed Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2060 Inflation Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 4. English Cities Fund Management Company 5. Registered office: Cala House, 54 The Causeway, Surrey, TW18 3AX 6. Open Ended Investment Company 8. Registered office: Whittington Hall, Whittington Road, Worcester, Worcestershire, United Kingdom, WR5 2ZX 9. Registered office: The Stanley Building, 7 St Pancras Square, London, N1C 4AG 10. Registered office: 40 Eastbourne Terrace, London, England, W2 6LG 11. Registered office: 6th Floor Lansdowne House, Berkeley Square, London, United Kingdom, W1J 6ER 12. Registered office: Europa House, 20 Esplanade, Scarborough, North Yorkshire, YO11 2AQ 13. Registered office: Room 902, 9th Floor, Chinachem Tower, 34-37 Connaught Road Central, Hong Kong 14. Registered office: 70 Sir John Rogerson Quay, Dublin 2, D02 XK09, Ireland 15. Irish Collective Asset-management Vehicle 16. Qualifying Investor Alternative Investment Fund 17. Qualifying Investor Alternative Investment Fund Irish Collective Asset-management Vehicle 18. Registered office: Grand Canal House, 1 Upper Grand Canal Street, Dublin 4, Ireland 19. Registered office: 33/34 Sir John Rogerson\u2019s Quay Dublin 2, DO2 XK09, Ireland Year end % of equity reporting shares held Company name Nature of business Share class date by the group 42 Subsidiaries continued Year end % of equity reporting shares held Company name Nature of business Share class date by the group LGIM 2060 Leveraged Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2060 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2062 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2068 Leveraged Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM 2068 Leveraged Index Linked Gilt Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Bespoke Active Credit Fund BP QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Credit and Liquidity \u2013 Fund BM QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Credit and Liquidity \u2013 Fund BN QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Euro 2030 Real Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Fixed Long Duration Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Fixed Short Duration Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund A QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AC QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AE QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AI QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AK QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AO QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AR QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AS QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AT QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AU QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AV QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AW QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AY QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund AZ QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund B QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BB QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BF QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BG QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BH QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BI QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BJ QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BL QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BT QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BU QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund BV QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund C QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund CJ QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund CK QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund CI QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund CL QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund DC QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund DJ QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund DK QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund DO QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund L QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund O QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund Q QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund V QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund WH QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund WS QIAIF 16 Ordinary 31\u2013Dec 100.0 Year end % of equity reporting shares held Company name Nature of business Share class date by the group LGIM Hedging Fund WT QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Hedging Fund ZZ QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Leveraged Gilt Plus Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Leveraged Index Linked Gilt Plus Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Leveraged Synthetic Equity Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Maturing Buy & Maintain Credit Fund 2020-2024 QIAIF16 Ordinary 31\u2013Dec 100.0 LGIM Maturing Buy & Maintain Credit Fund 2025-2029 QIAIF16 Ordinary 31\u2013Dec 100.0 LGIM Maturing Buy & Maintain Credit Fund 2030-2034 QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Maturing Buy & Maintain Credit Fund 2035-2039 QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Maturing Buy & Maintain Credit Fund 2040-2054 QIAIF16 Ordinary 31\u2013Dec 100.0 LGIM Real Long Duration Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Real Short Duration Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund BA QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund BK QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund BW QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund BX QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund BY QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CA QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CB QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CC QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CD QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CF QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CG QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CH QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CP QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CQ QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CS QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CT QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CU QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund CW QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DB QIAIF16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DE QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DF QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DH QIAIF16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DI QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DM QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DN QIAIF16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DQ QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DR QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DU QIAIF16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DV QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DW QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Solutions Fund DY QIAIF 16 Ordinary 31\u2013Dec 50.0 LGIM Solutions Fund M QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Synthetic Leveraged Credit Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 LGIM Synthetic Leveraged Equity Fund \u2013 GBP Currency Hedged Fund QIAIF16 Ordinary 31\u2013Dec 100.0 LGIM Unleveraged Defensive Synthetic Equity Fund QIAIF 16 Ordinary 31\u2013Dec 100.0 16. Qualifying Investor Alternative Investment Fund Sterling Liquidity Fund OEIC 6 Ordinary 31\u2013Dec 48.8 US Dollar Liquidity Fund OEIC 6 Ordinary 31\u2013Dec 46.7 Country of incorporation: Japan Legal & General Investment Management Japan KK 20 Investment management Ordinary 31\u2013Dec 100.0 Country of incorporation: Jersey Access Development General Partner Limited 21 Fund general partner Partnership 31\u2013Dec 100.0 Bishopsgate Long Term Property Fund General Partner Limited22 Fund general partner Partnership 31\u2013Dec 100.0 Bishopsgate Long-term Property Fund Limited Partnership22 Limited partnership Partnership 31\u2013Dec 25.0 Bishopsgate Long-term Property Fund Nominees No 1 Limited 22 Real estate operator Ordinary 31\u2013Dec 25.0 Bishopsgate Long-term Property Fund Nominees No 2 Limited 22 Real estate operator Ordinary 31\u2013Dec 25.0 Borehamwood Property Unit Trust 22 Unit trust Unit 31\u2013Dec 100.0 SCBD S6 Trust23 Unit trust Unit 31\u2013Dec 100.0 Stratford City Offices Jersey Unit Trust 23 Unit trust Unit 31\u2013Dec 100.0 Vantage General Partner Limited21 Fund general partner Partnership 31\u2013Dec 100.0 Vantage London Limited Partnership21 Limited partnership Partnership 31\u2013Dec 11.1 Country of incorporation: Luxembourg L&G Absolute Return Bond Fund SICAV 24 Ordinary 31\u2013Dec 87.7 L&G Absolute Return Bond Plus Fund SICAV 24 Ordinary 31\u2013Dec 35.2 L&G Buy & Maintain Credit Fund SICAV 24 Ordinary 31\u2013Dec 98.6 L&G Commodity Index Fund SICAV 24 Ordinary 31\u2013Dec 79.8 L&G Emerging Markets Short Duration Bond Fund SICAV 24 Ordinary 31\u2013Dec 36.1 L&G Future World Global Credit Fund SICAV 24 Ordinary 31\u2013Dec 56.9 L&G Future World Global Equity Focus Fund SICAV 24 Ordinary 31\u2013Dec 84.4 L&G Global Diversified Credit Fund SICAV 24 Ordinary 31\u2013Dec 73.9 L&G Net Zero Global Corporate Bond Fund SICAV 24 Ordinary 31\u2013Dec 85.1 L&G NTR Clean Power GP S.\u00e0 r.L.25 Fund general partner Partnership 31\u2013Dec 100.0 L&G UK Core Plus Bond Fund SICAV 24 Ordinary 31\u2013Dec 100.0 Country of incorporation: Scotland CALA 1999 Limited 26 Holding company Ordinary 31\u2013Dec 100.0 CALA Group Limited 26 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes (East) Limited 27 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes (North) Limited27 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes (Scotland) Limited 27 Non-trading company Ordinary 31\u2013Dec 100.0 CALA Homes (West) Limited27 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Homes Limited27 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Land Investments (Bearsden) Limited 26 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Land Investments Limited26 Development of building projects Ordinary 31\u2013Dec 100.0 CALA Limited26 Head office Ordinary 31\u2013Dec 100.0 CALA Management Limited26 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Properties (Holdings) Limited27 Non-trading company Ordinary 31\u2013Dec 100.0 CALA Ventures Limited26 Domestic building construction Ordinary 31\u2013Dec 100.0 CALA Properties (Holdings) Limited27 Non-trading company Ordinary 31\u2013Dec 100.0 CALA Ventures Limited26 Domestic building construction Ordinary 31\u2013Dec 100.0 UK PIF FGP LLP28 Limited liability partnership Partnership 31\u2013Dec 100.0 UK PIF Two Founder Partner Limited, LP 28 Fund general partner Partnership 31\u2013Dec 100.0 UKPIF Two Founder GP Limited 28 Fund general partner Partnership 31\u2013Dec 100.0 Country of incorporation: USA Ancora Community Impact CDE LLC 29 Dormant company Ordinary 31\u2013Dec 50.0 Ancora Investments LLC29 Management of real estate investments Ordinary 31\u2013Dec 50.0 42 Subsidiaries continued Year end % of equity reporting shares held Company name Nature of business Share class date by the group Ancora L&G, LLC 30 Holding company for investment in subsidiaries Ordinary 31\u2013Dec 50.0 Ancora Partners, LLC29 Provision of management services Ordinary 31\u2013Dec 50.0 Ancora TEP Holdings LLC 30 Holding company Ordinary 31\u2013Dec 99.8 Ancora TEP JV LLC30 Holding company Class A and Class B shares 31\u2013Dec 99.8 Banner Life Insurance Company31 Long-term business Ordinary 31\u2013Dec 100.0 Chesapeake Ventures, LLC 29 Limited company Ordinary 31\u2013Dec 100.0 FBV Financing-1, LLC 29 Limited company Ordinary 31\u2013Dec 100.0 FBV Financing-2, LLC 29 Limited company Ordinary 31\u2013Dec 100.0 FBV Financing-3, LLC 29 Limited company Ordinary 31\u2013Dec 100.0 First British Vermont Reinsurance Company II, Limited 32 Reinsurance Ordinary 31\u2013Dec 100.0 First British Vermont Reinsurance Company III, Limited 29 Reinsurance Ordinary 31\u2013Dec 100.0 Global Index Advisors Inc. 33 Investment advisory Ordinary 31\u2013Dec 100.0 Legal & General America Inc. 34 Holding company Ordinary 31\u2013Dec 100.0 Legal & General Investment Management America Inc. 34 Institutional fund management Ordinary 31\u2013Dec 100.0 Legal & General Investment Management United States (Holdings), Inc.34 Holding company Ordinary 31\u2013Dec 100.0 LGC US Holdco 1 Inc.34 Holding company Ordinary 31\u2013Dec 100.0 LGC US Holdco 2 LLC 30 Holding company Ordinary 31\u2013Dec 100.0 William Penn Life Insurance Company of New York Inc. 35 Long term business Ordinary 31\u2013Dec 100.0 6. Open Ended Investment Company 20. Registered office: 22F Toranomon Kotohira Tower, 1-2-8 Toranomon, Minato-ku, Tokyo, 105-0001, Japan 21. Registered office: 11-15 Seaton Place St Helier, Jersey, JE4 0QH 22. Registered office: 12 Castle Street, St Helier Jersey, JE2 3RT 23. Registered office: Lime Grove House, Green Street, St Helier, Jersey, JE1 2ST 24. Soci\u00e9t\u00e9 d\u2019investissement \u00e0 capital variable 25. Registered office: 9, Rue de Bitbourg, Luxembourg, L-1273 26. Registered office: Adam House, 5 Mid New Cultins, Edinburgh, EH11 4DU 27. Registered office: Johnstone House, 52-54 Rose Street, Aberdeen, AB10 1HA 28. Registered office: 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ 29. Registered office: 850 New Burton Road, Suite 201, Dover, Delaware, 19904, USA 30. Registered office: 108 Lakeland Avenue, Dover, Kent County, DE 19901, USA 31. Registered office: 1701 Research Boulevard, Rockville, Maryland, 20850, USA 32. Registered office: Marsh Management Services, 100 Bank Street, Suite 610, Burlington, VT, 05402, USA 33. Registered office: 29 North Park Square, Ste.201, Marietta, GA, 30060, USA 34. Registered office: Corporation Trust Centre, 1209 Orange Street, Wilmington, New Castle, DE, 19801, USA 35. Registered office: 100 Quentin Roosevelt Blvd, PO Box 519, Garden City New York, 11530, USA Year end % of equity reporting shares held Company name Nature of business Share class date by the group ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-636": { "value": "Associates are entities over which the group has significant influence but which it does not control. It is presumed that the group has significant influence where it has between 20% and 50% of the voting rights in the investee unless indicated otherwise. Joint ventures are entities where the group and other parties have joint control over their activities. The basis by which associates and joint ventures are consolidated in the group financial statements is outlined in the basis of preparation (Note 1) . ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-628": { "value": "Associates are entities over which the group has significant influence but which it does not control. It is presumed that the group has significant influence where it has between 20% and 50% of the voting rights in the investee unless indicated otherwise. Joint ventures are entities where the group and other parties have joint control over their activities. The basis by which associates and joint ventures are consolidated in the group financial statements is outlined in the basis of preparation (Note 1) . ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-599": { "value": "Associates are entities over which the group has significant influence but which it does not control. It is presumed that the group has significant influence where it has between 20% and 50% of the voting rights in the investee unless indicated otherwise. Joint ventures are entities where the group and other parties have joint control over their activities. The basis by which associates and joint ventures are consolidated in the group financial statements is outlined in the basis of preparation (Note 1) ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-629": { "value": "The group has the following significant holdings classified as associates and joint ventures which have been included as financial investments, and investments in associates and joint ventures accounted for using the equity method. The gross assets of these companies are in part funded by borrowings which are non-recourse to the group. Year end % of equity Country of Accounting Investment reporting Share shares held Company name incorporation treatment type date class by the group 245 Hammersmith Road Limited Partnership1 England and Wales FVTPL Joint Venture 31\u2013Dec Partnership 50.0 Access Development Limited Partnership2 Jersey Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Austin Heath Management Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Bracknell Property Unit Trust 4,5 Jersey FVTPL Joint Venture 31\u2013Dec Units 50.9 Bruntwood SciTech Limited 6 England and Wales Equity Method Joint Venture 30\u2013Sep Ordinary 50.0 CALA Evans Restoration Limited 7 Scotland Equity Method Joint Venture 30\u2013Jun Ordinary 50.0 Congenica Limited 8 England and Wales Equity Method Associate 31\u2013Dec Ordinary 7.5 Durrants Management Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 ECV Partnerships Tattenhall Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 ECV Partnerships Warwick Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Elderswell Management Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 English Cities Fund1 England and Wales FVTPL Associate 31\u2013Dec Partnership 35.4 Gifford Lea Management Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Great Alne Park Management Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Household Capital Pty Limited9 Australia Equity Method Associate 30\u2013Jun Ordinary 38.3 Imagine Mortgages Limited (Generation Home)10 England and Wales FVTPL Associate 31\u2013Dec Ordinary 20.0 Kao Data Limited11 England and Wales FVTPL Associate 31\u2013Dec Ordinary 30.0 Kensa Group Limited12 England and Wales FVTPL Associate 31\u2013Dec Ordinary 37.6 Ledian Gardens Management Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 LGHM-VIVID JV LLP 1 England and Wales Equity Method Joint Venture 31\u2013Mar Ordinary 50.0 MoneyHub Financial Technology Limited 13 England and Wales FVTPL Associate 28\u2013Feb Ordinary 9.0 Newcastle Science Central Developments LLP 14 England and Wales FVTPL Associate 31\u2013Dec Ordinary 33.3 NTR Wind Management Limited15 Ireland FVTPL Associate 31\u2013Mar Ordinary 25.0 Onto Holdings Limited16 England and Wales FVTPL Associate 31\u2013Dec Ordinary 12.0 Oxford University Property Development Limited17 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Pemberton Asset Management Holdings Limited18 Jersey FVTPL Associate 31\u2013Dec Ordinary 40.0 Salary Direct Holdings Limited 19 Jersey FVTPL Associate 31\u2013Dec Ordinary 49.9 Senior Living (Albourne) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Aylesbury) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Boston Spa) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Broadbridge Heath) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Caddington) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Chandlers Ford) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Comberton) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 1. Registered office: One Coleman Street, London, EC2R 5AA 2. Registered office: 11-15 Seaton Place, St Helier, Jersey, JE4 0QH 3. Registered office: Unit 3 Edwalton Business Park, Landmere Lane, Edwalton, Nottingham, United Kingdom, NG12 4JL 4. Registered office: 47 Esplanade, St. Helier, Jersey, JE1 0BD 5. Bracknell Property Unit Trust is classified as a Joint Venture because the group does not control the entity 6. Registered office: Union, Albert Square, Manchester, England, M2 6LW 7. Registered office: Johnstone House, 52-54 Rose Street, Aberdeen, AB10 1HA 8. Registered office: Biodata Innovation Centre, Wellcome Genome Campus, Hinxton, Cambridge CB10 1DR 9. Registered office: Level 12/1 Nicholson St, East Melbourne VIC 3000 10. Registered office: Unit 80, Exmouth House, Pine Street, London, England, EC1R 0JH 11. Registered office: Kao Data Campus, London Road, Harlow, United Kingdom, CM17 9NA 12. Registered office: Mount Wellington, Fernsplatt, Chacewater, Truro, Cornwall, TR4 8RJ 13. Registered office: C/O Roxburgh Milkins Limited Merchants House North, Wapping Road, Bristol, United Kingdom, BS1 4RW 14. Registered office: Finance And Planning Newcastle University, King\u2019s Gate, Newcastle Upon Tyne, United Kingdom, NE1 7RU 15. Registered office: Burton Court, Burton Hall Drive, Sandyford, Dublin D18 Y2T8 16. Registered office: Ailsa House, Wedgnock Lane, Warwick, United Kingdom, CV34 5YA 17. Registered office: University Offices, Wellington Square, Oxford, United Kingdom, OX1 2JD 18. Registered office: 44 Esplanade, St Helier, Jersey JE4 9WG 19. Registered office: 35-37 New Street, St Helier, Jersey, JE2 3RA Year end % of equity Country of Accounting Investment reporting Share shares held Company name incorporation treatment type date class by the group Senior Living (Dore) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Durrants) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Freelands) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Great Leighs) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Halstead) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Hemel Hempstead) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Horndean) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Knowle) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Ledian Farm) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Liphook) Limited20 Jersey Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Matchams) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Sonning Common) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Stamford) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Sunbury-on-Thames) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Tattenhall) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Tunbridge Wells) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Turvey) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Walkern) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Warwick Gates) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living Finance 1 Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Sennen Finance Designated Activity Company 21 Ireland Equity Method Joint Venture 31\u2013Dec \u2013 \u2013 Smartr365 Finance Limited22 England and Wales FVTPL Associate 31\u2013Mar Ordinary 49.0 SOJV LLP 1 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Tattenhall Care Village LLP 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Warwick Gates LLP 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Winchburgh Developments (Holdings) Limited23 Scotland Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 1. Registered office: One Coleman Street, London, EC2R 5AA 3. Registered office: Unit 3 Edwalton Business Park, Landmere Lane, Edwalton, Nottingham, United Kingdom, NG12 4JL 20. Registered office: 3rd Floor, One The Esplanade, St Helier, Jersey, JE2 3QA 21. Registered office: 1-2 Victoria Buildings,Haddington Road, Dublin, Ireland, 4 D04 XN32 22. Registered office: 1 Queen Caroline Street, Hammersmith, London, United Kingdom, W6 9YN 23. Registered office: 1a Canal View, Winchburgh, Broxburn, West Lothian, EH52 6FE Summarised financial information for associates and joint ventures accounted for under the equity method is shown below: Joint Joint Associates ventures Associates ventures 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Current assets 32 486 15 557 Non-current assets 112 1,212 184 906 Current liabilities 6 171 10 184 Non-current liabilities 113 597 27 448 (Loss)/profit from continuing operations \u2013 total (20) 99 (33) 60 (Loss)/profit from continuing operations \u2013 group\u2019s share (2) 49 (5) 30 Total comprehensive income \u2013 total (20) 99 (33) 60 Total comprehensive income \u2013 group\u2019s share (2) 49 (5) 30 The associates and joint ventures have no significant contingent liabilities to which the group is exposed. The group has no commitments to provide funding to associates and joint ventures other than the ones included in Note 41. During the year, the total value of Investment in associates and joint ventures accounted for using the equity method on the group\u2019s Consolidated Balance Sheet increased to \u00a3554m (2021: \u00a3375m), reflecting a number of additions and disposals, as well as the group\u2019s share of the profits and losses of the respective associates and joint ventures. 43 Associates and joint ventures continued (ii) Other significant holdings The group has the following other significant holdings which have been included as financial investments: Year end % of equity Country of reporting shares held Company name incorporation date Share class by the group Bishopsgate Long-Term Property Limited Partnership1 Jersey 31\u2013Dec Limited Partner 25.0 1. The net asset value at 31 December 2022 was \u00a35.0m (2021: \u00a387.1m) and the registered office is 12 Castle Street, St Helier, Jersey, JE2 3RT. ", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-600": { "value": "The group has the following significant holdings classified as associates and joint ventures which have been included as financial investments, and investments in associates and joint ventures accounted for using the equity method. The gross assets of these companies are in part funded by borrowings which are non-recourse to the group. Year end % of equity Country of Accounting Investment reporting Share shares held Company name incorporation treatment type date class by the group 245 Hammersmith Road Limited Partnership1 England and Wales FVTPL Joint Venture 31\u2013Dec Partnership 50.0 Access Development Limited Partnership2 Jersey Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Austin Heath Management Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Bracknell Property Unit Trust 4,5 Jersey FVTPL Joint Venture 31\u2013Dec Units 50.9 Bruntwood SciTech Limited 6 England and Wales Equity Method Joint Venture 30\u2013Sep Ordinary 50.0 CALA Evans Restoration Limited 7 Scotland Equity Method Joint Venture 30\u2013Jun Ordinary 50.0 Congenica Limited 8 England and Wales Equity Method Associate 31\u2013Dec Ordinary 7.5 Durrants Management Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 ECV Partnerships Tattenhall Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 ECV Partnerships Warwick Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Elderswell Management Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 English Cities Fund1 England and Wales FVTPL Associate 31\u2013Dec Partnership 35.4 Gifford Lea Management Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Great Alne Park Management Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Household Capital Pty Limited9 Australia Equity Method Associate 30\u2013Jun Ordinary 38.3 Imagine Mortgages Limited (Generation Home)10 England and Wales FVTPL Associate 31\u2013Dec Ordinary 20.0 Kao Data Limited11 England and Wales FVTPL Associate 31\u2013Dec Ordinary 30.0 Kensa Group Limited12 England and Wales FVTPL Associate 31\u2013Dec Ordinary 37.6 Ledian Gardens Management Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 LGHM-VIVID JV LLP 1 England and Wales Equity Method Joint Venture 31\u2013Mar Ordinary 50.0 MoneyHub Financial Technology Limited 13 England and Wales FVTPL Associate 28\u2013Feb Ordinary 9.0 Newcastle Science Central Developments LLP 14 England and Wales FVTPL Associate 31\u2013Dec Ordinary 33.3 NTR Wind Management Limited15 Ireland FVTPL Associate 31\u2013Mar Ordinary 25.0 Onto Holdings Limited16 England and Wales FVTPL Associate 31\u2013Dec Ordinary 12.0 Oxford University Property Development Limited17 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Pemberton Asset Management Holdings Limited18 Jersey FVTPL Associate 31\u2013Dec Ordinary 40.0 Salary Direct Holdings Limited 19 Jersey FVTPL Associate 31\u2013Dec Ordinary 49.9 Senior Living (Albourne) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Aylesbury) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Boston Spa) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Broadbridge Heath) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Caddington) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Chandlers Ford) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Comberton) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 1. Registered office: One Coleman Street, London, EC2R 5AA 2. Registered office: 11-15 Seaton Place, St Helier, Jersey, JE4 0QH 3. Registered office: Unit 3 Edwalton Business Park, Landmere Lane, Edwalton, Nottingham, United Kingdom, NG12 4JL 4. Registered office: 47 Esplanade, St. Helier, Jersey, JE1 0BD 5. Bracknell Property Unit Trust is classified as a Joint Venture because the group does not control the entity 6. Registered office: Union, Albert Square, Manchester, England, M2 6LW 7. Registered office: Johnstone House, 52-54 Rose Street, Aberdeen, AB10 1HA 8. Registered office: Biodata Innovation Centre, Wellcome Genome Campus, Hinxton, Cambridge CB10 1DR 9. Registered office: Level 12/1 Nicholson St, East Melbourne VIC 3000 10. Registered office: Unit 80, Exmouth House, Pine Street, London, England, EC1R 0JH 11. Registered office: Kao Data Campus, London Road, Harlow, United Kingdom, CM17 9NA 12. Registered office: Mount Wellington, Fernsplatt, Chacewater, Truro, Cornwall, TR4 8RJ 13. Registered office: C/O Roxburgh Milkins Limited Merchants House North, Wapping Road, Bristol, United Kingdom, BS1 4RW 14. Registered office: Finance And Planning Newcastle University, King\u2019s Gate, Newcastle Upon Tyne, United Kingdom, NE1 7RU 15. Registered office: Burton Court, Burton Hall Drive, Sandyford, Dublin D18 Y2T8 16. Registered office: Ailsa House, Wedgnock Lane, Warwick, United Kingdom, CV34 5YA 17. Registered office: University Offices, Wellington Square, Oxford, United Kingdom, OX1 2JD 18. Registered office: 44 Esplanade, St Helier, Jersey JE4 9WG 19. Registered office: 35-37 New Street, St Helier, Jersey, JE2 3RA Year end % of equity Country of Accounting Investment reporting Share shares held Company name incorporation treatment type date class by the group Senior Living (Dore) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Durrants) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Freelands) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Great Leighs) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Halstead) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Hemel Hempstead) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Horndean) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Knowle) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Ledian Farm) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Liphook) Limited20 Jersey Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Matchams) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Sonning Common) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Stamford) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Sunbury-on-Thames) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Tattenhall) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Tunbridge Wells) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Turvey) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Walkern) Limited 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living (Warwick Gates) Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Senior Living Finance 1 Limited3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Sennen Finance Designated Activity Company 21 Ireland Equity Method Joint Venture 31\u2013Dec \u2013 \u2013 Smartr365 Finance Limited22 England and Wales FVTPL Associate 31\u2013Mar Ordinary 49.0 SOJV LLP 1 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Tattenhall Care Village LLP 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Warwick Gates LLP 3 England and Wales Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 Winchburgh Developments (Holdings) Limited23 Scotland Equity Method Joint Venture 31\u2013Dec Ordinary 50.0 1. Registered office: One Coleman Street, London, EC2R 5AA 3. Registered office: Unit 3 Edwalton Business Park, Landmere Lane, Edwalton, Nottingham, United Kingdom, NG12 4JL 20. Registered office: 3rd Floor, One The Esplanade, St Helier, Jersey, JE2 3QA 21. Registered office: 1-2 Victoria Buildings,Haddington Road, Dublin, Ireland, 4 D04 XN32 22. Registered office: 1 Queen Caroline Street, Hammersmith, London, United Kingdom, W6 9YN 23. Registered office: 1a Canal View, Winchburgh, Broxburn, West Lothian, EH52 6FE Summarised financial information for associates and joint ventures accounted for under the equity method is shown below: Joint Joint Associates ventures Associates ventures 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Current assets 32 486 15 557 Non-current assets 112 1,212 184 906 Current liabilities 6 171 10 184 Non-current liabilities 113 597 27 448 (Loss)/profit from continuing operations \u2013 total (20) 99 (33) 60 (Loss)/profit from continuing operations \u2013 group\u2019s share (2) 49 (5) 30 Total comprehensive income \u2013 total (20) 99 (33) 60 Total comprehensive income \u2013 group\u2019s share (2) 49 (5) 30 The associates and joint ventures have no significant contingent liabilities to which the group is exposed. The group has no commitments to provide funding to associates and joint ventures other than the ones included in Note 41. During the year, the total value of Investment in associates and joint ventures accounted for using the equity method on the group\u2019s Consolidated Balance Sheet increased to \u00a3554m (2021: \u00a3375m), reflecting a number of additions and disposals, as well as the group\u2019s share of the profits and losses of the respective associates and joint ventures. 43 Associates and joint ventures continued (ii) Other significant holdings The group has the following other significant holdings which have been included as financial investments: Year end % of equity Country of reporting shares held Company name incorporation date Share class by the group Bishopsgate Long-Term Property Limited Partnership1 Jersey 31\u2013Dec Limited Partner 25.0 1. The net asset value at 31 December 2022 was \u00a35.0m (2021: \u00a387.1m) and the registered office is 12 Castle Street, St Helier, Jersey, JE2 3RT. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-601": { "value": "44 Interests in structured entities A structured entity is an entity that has been designed so that voting or similar rights are not the dominating factor in deciding who controls the entity, such as when voting rights might relate to administrative tasks only and the relevant activities are directed by means of contractual arrangement. The group has interests in investment vehicles which, depending upon their status, are classified as either consolidated or unconsolidated structured entities as described below: \u2022 Debt securities, consisting of traditional asset backed securities, together with securitisation and debentures and Collateralised Debt Obligations (CDOs); \u2022 Investment funds, largely being unit trusts; and \u2022 Specialised investment vehicles, analysed between Irish Collective Asset-management Vehicles (ICAVs), Open Ended Investment Companies (OEICs), Soci\u00e9t\u00e9s d\u2019Investissement \u00e0 Capital Variables (SICAVs), Specialised Investment Funds (SIFs), Qualifying Investor Alternative Investment Fund (QIAIF), Liquidity funds, Common Contractual Fund (CCF), and Property unit trusts. All of the group\u2019s holdings in the above vehicles are subject to the terms and conditions of the respective investment vehicle\u2019s offering documentation and are susceptible to market price risk arising from uncertainties about future values of those investment vehicles. The investment manager makes investment decisions after extensive due diligence of the underlying investment vehicle, including consideration of its strategy and the overall quality of the underlying investment vehicle\u2019s manager. All of the investment vehicles in the investment portfolio are managed by portfolio managers who are compensated by the respective investment vehicles for their services. Such compensation generally consists of an asset-based fee and a performance related incentive fee, and is reflected in the valuation of the investment vehicles. (i) Interests in consolidated structured entities The group has determined that where it has control over an investment vehicle, that investment is a consolidated structured entity. The group has not provided, and has no intention to provide, financial or other support to any other structured entities which it does not consolidate. (ii) Interests in unconsolidated structured entities As part of its investment activities, the group also invests in unconsolidated structured entities. As at 31 December 2022, the group\u2019s interest in such entities reflected on the group\u2019s Consolidated Balance Sheet and classified as financial investments held at fair value through profit or loss was \u00a319,867m (2021: \u00a321,217m). A summary of the group\u2019s interests in unconsolidated structured entities is provided below: Financial Financial investments investments 2022 2021 1 \u00a3m \u00a3m Debt securities Analysed as: Asset backed securities 3,075 2,752 Securitisations and debentures 203 136 CDOs 66 81 Investment funds and Specialised Investment Vehicles Analysed as: Unit trusts 12,160 13,841 Property limited partnerships 899 710 Exchange traded funds 185 124 Liquidity funds 744 822 ICAVs 83 135 OEICs 245 333 SICAVs 260 284 QIAIF ICAVs 1 1 SIFs 1,818 1,573 Property unit trusts 128 425 Total 19,867 21,217 1. For 2021, the amounts have been updated to reflect the correct analysis of interests across the categories within Investment funds and Specialised Investment Vehicles. There is no impact in respect of the total Financial investments related to interests in unconsolidated structured entities reflected on the group\u2019s Consolidated Balance Sheet as at 31 December 2021. Management fees received for investments that the group manages also represent interests in unconsolidated structured entities, and the group always maintains an interest in those funds which it manages. Where the group does not manage the investments, its maximum exposure to loss is the carrying amount in the group Consolidated Balance Sheet. Where the group does manage these investments, the maximum exposure is the underlying balance sheet value, together with future management fees. The table below shows the assets under management of those structured entities which the group manages, together with investment management fees received from external parties. Investment Investment management management AUM fees AUM fees 2022 2022 2021 2021 \u00a3m \u00a3m \u00a3m \u00a3m Investment funds 86,037 138 95,889 168 Specialised Investment Vehicles 23,325 60 26,687 60 Analysed as: OEICs 174 \u2013 492 1 SICAVs 891 2 1,074 2 Property limited partnerships 4,305 21 5,178 27 ETF 7,639 25 8,771 21 ICAV 7,750 8 10,207 8 QIAIF 715 1 395 \u2013 Liquidity funds 270 1 338 1 CCF 1,581 2 232 \u2013 Total 109,362 198 122,576 228 No significant sponsorship has been provided to any of the above entities. The group has not, and has no intention, to provide any significant financial or other support to any other structured entities which it does not consolidate. In addition to the above, the group has an exposure of \u00a3188m (2021: \u00a3300m) related to special purpose vehicles classified as joint ventures and accounted for using the equity method, with a carrying value on the group Consolidated Balance Sheet as at 31 December 2022 of \u00a3nil (2021: \u00a3nil).", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInUnconsolidatedStructuredEntitiesExplanatory", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-21": { "value": "One Coleman Street, London EC2R 5AA", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:213800JH9QQWHLO99821", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } } } }