Legal & General : Full year results 2023

DocuSign Envelope ID: 3C9BACAC-22A0-47B4-B714-FBC4EFFEA590

Company number 02338444

Legal & General Finance PLC

Report and Accounts

Year ended 31 December 2023

DocuSign Envelope ID: 3C9BACAC-22A0-47B4-B714-FBC4EFFEA590

Legal & General Finance PLC

Report and Accounts 2023

Contents

6 Directors' Report

1. Statement of Comprehensive Income
2. Balance Sheet
3. Statement of Changes in Equity
4. Notes to the Financial Statements

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The directors present their Strategic Report on Legal & General Finance PLC ('the Company') for the year ended 31 December 2023.

Principal activities

Legal & General Finance PLC is a public limited company incorporated in England and Wales, whose ultimate controlling party is Legal & General Group Plc. The Company's registered office is at One Coleman Street, London, EC2R 5AA, United Kingdom. It is registered in England and Wales under company registration number 02338444 and domiciled in the United Kingdom. The principal activity of the Company throughout the year was to operate as a finance company.

The Company's prime objective is to provide funding to Legal & General Group Plc and its global subsidiaries ('the Group'), by raising finance from capital markets and investing in liquid assets. In fulfilling this role, the Company issues listed debt through Legal & General Group Plc's £5bn Euro Medium Term Note Programme and the Company's US $2bn Commercial Paper Programme. All of the Company's issued listed debt under these programmes is guaranteed by Legal & General Group Plc.

The Directors' Report and financial risk management note are on pages 6 and 24 respectively.

Business review and future developments

The Company continued to provide funding to other Legal & General group companies throughout the year. The directors do not envisage any changes in activity for the foreseeable future. During the year the Company issued and repaid operational borrowings under the commercial paper programme noted above.

Financial review and key performance indicators

The directors review a range of performance indicators to monitor the performance of the Company. Profit before income tax, total assets and net assets are regarded as the principal key performance indicators.

The profit before income tax of the Company increased to £32.1m (2022: £27.4m) mainly reflecting increased income from loans to other group companies and investments, partially offset by a rise in interest paid to other group companies. Total assets as at 31 December 2023 were £3,571.9m (2022: £3,271.2m) and nets assets were £80.5m (2022: £56.0m).

Section 172(1) statement

The Company's Section 172(1) Statement & Stakeholder Engagement is on page 4.

Principal risks and uncertainties

The Company's business involves the acceptance and management of risk. A detailed review of the Company's exposure to risks, including market risk, credit risk and liquidity risk, together with the framework for the management and analysis of the exposure of the Company's financial instruments to risk, is set out in Note 16. The principal risks and uncertainties facing the Company are:

a) Market risk

The Company is exposed to fluctuations in exchange rates which may impact income from, or the value of, assets denominated in foreign currencies. Interest rate movements can affect profits as well as potentially impacting investment and fund raising activities. The global economic outlook remains challenging. While the market continues to predict significant falls in interest rates over 2024 supported by an easing of inflationary pressures, other factors may slow this decline. Asset values remain susceptible to reappraisal should the current economic outlook deteriorate, as well as from a range of geo-political factors including the on-going conflicts in Ukraine and the Middle East. The Company may use derivatives to limit exposure to market risks, as deemed necessary.

b) Market infrastructure risk

The Company's investment and fund raising activities are reliant upon the availability of market infrastructure. Disruption to trading in markets may have a significant effect on the Company's operation and profitability.

c) Credit risk

A number of major banks operate as counterparties for the investments of the Company. Whilst the Company ensures that it only transacts with strongly rated counterparties, and it regularly reviews its level of exposure, the financial failure of a significant counterparty could result in disruption and financial loss.

d) Liquidity risk

Liquidity risk is the risk that the Company, though solvent, either does not have sufficient liquid financial resources available to enable it to meet its obligations as they fall due, or can only secure such liquid financial resources at an excessive borrowing cost relative to that achieved in the recent past by a comparably rated borrower or through the sale of illiquid assets at a price significantly below the fair value of such assets in the recent past. This risk can arise from adverse market conditions or an unexpected event that causes liquidity stress in other entities within the group.

e) Climate risk

The Company is exposed to climate risk through the move to a low-carbon economy and the impact this has on asset valuation and the economy.

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By Order of the Board:

L. Cornish

For and on behalf of Legal & General Co Sec Limited

Company Secretary

4 March 2024

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The Board of Legal and General Finance PLC (the 'Company') considers that it has adhered to the requirements of section 172 of the Companies Act 2006 and has, in good faith, acted in a way that it considers would be most likely to promote the success of the Company for the benefit of its shareholders as a whole and, in doing so, has had regard to, and recognised, the importance of considering all stakeholders and other matters (as set out in s.172(1)(a-f) of the Act) in its decision-making.

As part of the wider Legal & General Group (the 'Group'), taking into account the relative size and complexity of the Company and centralised nature of the Group, the Board may consider it reasonable for decision making to be handled by the Group Board. In such cases, this will be articulated in the Statement and reference provided to the Group's Annual Report

• Accounts for the year ended 2023 ('Group Annual Report & Accounts'). The Company's s.172 statement provides details of key stakeholder engagement undertaken by the Board during the year and how this helps the Board to factor potential impacts on stakeholders in the decision-making process. Further information on the Group's key stakeholders and their importance is set out in the Group's Annual Report & Accounts, which can be found here: www.legalandgeneralgroup.com/investors/results-reports-and-presentations.

General

The Group promotes the highest standards of governance and ensures that these standards cascade throughout the Group and its subsidiaries. Guiding principles are in place for the relationship between the Group Board and the Boards of the Group's principal subsidiaries. This framework promotes full and effective interaction across all levels of the Group to support the delivery of strategy and business objectives within a framework of best corporate governance practice. A full description of the Group's governance arrangements can be found in the Group Annual Report & Accounts.

Corporate governance underpins how we conduct ourselves as a Board, our culture, values, behaviours and how we do business. As a Board we are conscious of the impact that our business and decisions have on our direct stakeholders, as well as our wider societal impact.

As part of the director induction process, directors are briefed on their duties, including their duty under s.172 of the Companies Act 2006. The directors are entitled to request from the Company all such information they may reasonably require in order to be able to perform their duties as directors, including professional advice from either the Company Secretary or from an independent advisor at the Company's expense. On-going training is provided to the directors, as required, to ensure that their knowledge remains up to date and they continue to be able to discharge their duties as directors.

Stakeholder considerations are embedded in the decision-making of the Board and all key decision-making forums throughout the Group. As part of the paper submissions, all Group and subsidiary board papers must demonstrate that any potential impacts to stakeholders have been considered. Details of the potential impacts to our key stakeholders are included in the cover sheet for each Group and subsidiary Board paper throughout the year, where relevant. For each transaction approved by the Board, including but not limited to material acquisitions and strategic expansion, discussion takes place in relation to the employee impact and impact on other stakeholders, such as customers. The Board seeks to understand the views, priorities and issues of each stakeholder group so that these can be carefully considered by the Board. Whilst not all decisions affect every stakeholder group, the Board endeavours to balance the, sometimes conflicting, needs of its stakeholders to ensure that all groups are treated consistently and fairly.

Principal decisions

For the year ended 31 December 2023, the Board considers that the following is an example of a principal decision during the year:

• Approval of the annual update to the £5bn Euro Medium Term Note Programme ('EMTN'). Under the Euro Medium Term Note Programme, (i) Legal and General Finance PLC can issue senior unsubordinated notes, (ii) Legal & General Group Plc can issue both senior unsubordinated notes and subordinated notes; and (iii) Legal & General Group Plc guarantees the senior notes issued by Legal and General Finance PLC.

The table on the next page sets out our key stakeholders and provides examples of how we have engaged with them in the period, as well as demonstrating stakeholder consideration in the decision-making process.

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While s.172(1) requires consideration of all stakeholders, including employees and suppliers, due to the nature of Legal & General Finance PLC's operations within the wider Legal & General Group, it does not have any direct employee, regulator or supplier engagement. Engagement with these stakeholders is undertaken at Group level.

Further information on how the Legal & General Group Plc Board have engaged with stakeholders can be found in the Group s.172(1) Statement, which can be found here: legalandgeneralgroup.com/investors/results-reports-and-presentations.

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The directors present their Directors' Report together with the audited financial statements of Legal & General Finance PLC ('the Company') for the year ended 31 December 2023.

Results for the year and dividend

The results of the Company are set out on page 13. The directors do not recommend the payment of a final dividend (2022: £nil) and no interim dividends were declared or paid in the year (2022: £nil).

Directors

The directors of the Company, who were in office during the year and up to the date of signing the financial statements, together with their dates of appointment and resignation, where appropriate, are shown below:

S. J. Davies

1. Moore G. O'Neill
   F. B. Turley - resigned 30 June 2023 C. Wright - appointed 30 June 2023

Directors' insurance

The immediate and ultimate parent company, Legal & General Group Plc, maintains an appropriate level of directors' and Officers' liability insurance which is reviewed annually.

Directors' indemnities (s.236 of the Companies Act 2006)

As permitted by the Articles of Association, the directors have the benefit of an indemnity which is a qualifying third party indemnity provision as defined by Section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is currently in force.

Charitable donations

The Company did not make any charitable donations during the year (2022: £nil).

Political contributions

The Company did not make any political contributions during the year (2022: £nil).

Modern slavery

The Group and its global subsidiaries recognise that companies have an obligation to ensure that their business and supporting supply chains are slavery free. Legal & General's full modern slavery statement can be found at https://group.legalandgeneral.com/en/sustainability.

Internal control and risk management framework

The Board of directors has overall responsibility for the Company's systems of risk management and internal controls. The Company operates within the risk management framework and under the policies, procedures and internal controls maintained by its parent company.

The Group Audit Committee, in conjunction with the Group Risk Committee, assists in ensuring that the Group operates within a framework of prudent and effective controls which allows risk to be identified, assessed and managed. The Group's control policies and procedures are in accordance with the Financial Reporting Council's guidance on risk management, internal control and related financial and business reporting. The Group's system of internal control is designed to manage rather than eliminate risk and can only provide reasonable and not absolute assurance against material loss.

Accordingly, the Company adheres to the practices set out in the Financial Reporting Council's guidance on risk management, internal control and related financial and business reporting through a system of timely preparation of management and financial statements, internal review of the statements by suitably qualified finance professionals and periodic reviews by Group Internal Audit.

The Company's exposure to financial risks is contained in Note 16.

The day to day operations of the Company are managed by the Group's treasury function.

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Directors' Report (continued)

Legal & General Finance PLC

Report and Accounts 2023

Statement of Directors' responsibilities

The directors are responsible for preparing the Strategic Report, Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK accounting standards and applicable law, including FRS 101 Reduced Disclosure Framework.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing the financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant and reliable and prudent;
• state whether they have been prepared in accordance with UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and Directors' Report that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of the annual financial report

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
• the Strategic Report / Directors' Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

Disclosure of information to auditors

Each of the directors, who held office at the date the Director'' Report is approved, confirms that:

1. so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware; and
2. they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

This confirmation is given in accordance with Section 481(2) of the Companies Act 2006.

Independent auditors

Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.

By Order of the Board:

L. Cornish

For and on behalf of Legal & General Co Sec Limited Company Secretary

4 March 2024

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