L&G Half Year Results 2016 Part 2

1. Group debt costs exclude interest on non recourse financing.

2. Group investment projects and expenses in H1 16 include restructuring costs of £16m (H1 15: £9m; FY 15: £42m).

3. All earnings per share calculations are based on profit attributable to equity holders of the company.

1. Operational cash generation includes dividends remitted from LGN of £48m (H1 15: £18m; FY 15: £28m) within the Insurance line and LGA of £61m (H1 15: £52m; FY 15: £54m).

2. International and other includes £13m (H1 15: £7m; FY 15: £34m) of restructuring costs (£16m before tax) (H1 15: £9m before tax; FY 15: £42m before tax) within the group investment projects and expenses line.

3. The Kingswood office closure costs reflect expenditure in relation to redundancy, rent and rates. Further costs resulting from the write-off of previously capitalised property, plant and equipment will be recognised in later periods.

1. Operational cash generation includes dividends remitted from LGF of £1m and LGN of £28m within the Insurance line and LGA of £54m.        

2. International and other includes £34m of restructuring costs (£42m before tax) within the group investment projects and expenses line.

3. LGR includes the IDOL business which was previously reported in Insurance, and Insurance includes the advised sales and India businesses which were previously reflected in Savings. Comparatives have been amended accordingly.

1. The Insurance mortality/morbidity experience variance in 2016 reflects adverse claims experience on the group protection book of business.

2. The mortality/morbidity valuation assumption change in LGR primarily reflects a change in the treatment to historic longevity insurance deals where future fees in excess of prudent estimates of longevity and expense experience are now included as an offset to IFRS reserves. The H1 15 LGR mortality/morbidity change to valuation assumptions primarily reflected a change in mortality reserving assumptions in relation to unreported deaths of deferred annuitants.

3. The Insurance expense valuation assumption change is the result of a review of the prudence within renewal expenses on our protection products.

4. The Insurance other valuation assumption change has arisen from the increase of the reinsurance counterparty reserves driven by increased reinsured exposure.

5. Net cash for Insurance and Savings recognises tax relief from prior year acquisition expenses, which are spread evenly over seven years under relevant 'I-E' tax legislation in the period the cash flows actually occur. In contrast, operating profit typically recognises the value of these future cash flows in the same period as the underlying expense as deferred tax amounts. The reconciling amounts arising from these items are included in the table above. Following the removal of new retail protection business from the 'I-E' tax regime, and the removal of commission from new insured savings business under the Retail Distribution Review at the end of 2012, no material amount of deferred tax assets arise on new acquisition expenses and the value of these future cash flows for post-2013 acquisition expenses have been reflected within net cash. The residual prior year acquisition expenses will run off predictably to 2018.

6. The DAC in Savings represents the amortisation charges offset by new acquisition costs deferred in the year. The DIL reflects initial fees on insured savings business which relate to the future provision of services and are deferred and amortised over the anticipated period in which these services are provided.

7. The other movement in non-cash items for LGR is primarily driven by market reference fees as a result of writing higher volumes.

8. Insurance Other in 2016 reflects the difference between the dividend (operational cash generation) remitted from LGN of £48m (H1 15: dividends remitted from LGN of £18m and LGF of £1m) and the LGN operating profit after tax (H1 15: LGN and LGF operating profit after tax).