Legal & General Group Plc · LSE:LGEN
Legal & General — H1 2018 Earnings Presentation
38 slides from Legal & General's earnings presentation, August 2018
Slide 1: Delivering inclusive capitalism
Delivering inclusive capitalism Sharing success with investors, customers and society LEGAL & GENERAL GROUP PLC | HALF YEAR RESULTS – AUGUST 2018
Slide 2: Forward looking statements
Forward looking statements This document may contain certain forward-looking statements relating to Legal & General, its plans and its current goals and expectations relating to future financial condition, performance and results. By their nature, forward-looking statements involve uncertainty becau
Slide 3: Financial highlights: consistently delivering
NIGEL WILSON: GROUP CHIEF EXECUTIVE Financial highlights: consistently delivering Operating profit from divisions Interim dividend2 £1,059m 4.60p (H1 2017: £994m1) (H1 2017: 4.30p) +7% +7% SII operational surplus generation Earnings per share £0.7bn 13.00p (H1 2017: £0.6bn) (H1 2017: 14.19p1) +11% 1
Slide 4: Consistently delivering: operating profit from divisions
NIGEL WILSON: GROUP CHIEF EXECUTIVE Consistently delivering Operating profit from divisions (£m) 10% CAGR 2011 – 2018 2,034 1,902 1,702 1,483 1,329 1,040 1,277 960 1,109 849 768 668 674 591 942 994 1,059 715 853 518 609 655 2011 2012 2013 2014 2015 2016 2017 H1 2018 Note: 2017 excludes £126m base mo
Slide 5: Consistently delivering: earnings per share
NIGEL WILSON: GROUP CHIEF EXECUTIVE Consistently delivering Earnings per share (p) 10% CAGR 2011 – 2018 23.10 21.22 18.16 16.70 8.91 15.20 10.02 13.84 12.42 8.37 8.19 7.38 6.91 6.29 14.19 13.00 9.79 11.20 7.82 8.51 6.13 6.93 2011 2012 2013 2014 2015 2016 2017 H1 2018 Note: 2017 excludes £274m mortal
Slide 6: Consistently delivering: dividend per share
NIGEL WILSON: GROUP CHIEF EXECUTIVE Consistently delivering Dividend per share (p) 10% CAGR 2007 – 2018 15.35 14.35 13.40 11.25 9.30 11.05 10.35 7.65 9.95 5.97 6.40 8.35 4.75 6.90 4.06 3.84 5.69 4.10 4.74 2.05 3.42 2.73 4.00 4.30 4.60 2.90 3.45 1.87 2.01 1.66 1.96 2.40 1.11 1.33 2007 2008 2009 2010
Slide 7: Consistently delivering: Solvency II position
NIGEL WILSON: GROUP CHIEF EXECUTIVE Consistently delivering Solvency II Position1(£bn) 2016 (£bn) H1 H2 Total Coverage Ratio 163% 171% 186% 189% 193% Operational surplus generation 0.5 0.7 1.2 Own Funds £13.6bn £13.6bn £14.5bn £14.6bn £14.3bn New business strain - (0.1) (0.1) Net surplus generation
Slide 8: Structural growth drives profit
NIGEL WILSON: GROUP CHIEF EXECUTIVE Structural growth drives profit Operating Profit (£m) H1 2018 H1 2017 Var % H2 2018 Growth Drivers Legal & General • Actively quoting on £20bn UK PRT business, Retirement: 361 333 8 £7bn+ exclusive Institutional • $25bn US PRT market opportunity INVESTING & Legal
Slide 9: Financial Highlights
Financial Highlights Jeff Davies, Group Chief Financial Officer LEGAL & GENERAL GROUP PLC | HALF YEAR RESULTS | AUGUST 2018 9 LGIM Personal Investing campaign launched in June
Slide 10: Consistent delivery
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Consistent delivery £m H1 2018 H1 2017 % Operating profit from divisions excluding mortality release 1,059 994 7 Group debt costs (97) (92) (5) Group investment projects & expenses (53) (40) (33) Operating profit excluding mortality release 909 862 5 Mortal
Slide 11: Benefits of a diversified business model
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Benefits of a diversified business model LGI 15% LGRI Operating 36% LGC profit from 17% continuing divisions £1,003m LGIM LGRR 20% 12% Including mortality release Operating Profit (£m) H1 2018 H1 2017 % H1 2017 % Legal & General Retirement Institutional (LG
Slide 12: Investing in the business
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Investing in the business 1. Technology: 2. M&A: LGIM: New Digital Capability Canvas ETF LGR: New Admin Platform Cala Homes GI: SmartQuote Buddies GI: SmartClaim Salary Finance 3. Customer: 4. Regulatory: My account IFRS 17 legalandgeneral.com GDPR Cyber se
Slide 13: LGR: Consistently delivering strong profits
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGR: Consistently delivering strong profits FINANCIAL HIGHLIGHTS H1 2018 H1 2017 • Operating profit of £480m, reflecting: Release from operations (£m) 275 256 - Strong performance from back book prudential New business surplus (£m) 23 51 margin releases Net
Slide 14: LGR: Well positioned for significant opportunities
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGR: Well positioned for significant opportunities TOTAL SALES (£m) H1 2018 H1 2017 - Annuity premium of £1.1bn UK Pension risk transfer 507 1,504 - US PRT sales ($297m) more than double H1 2017 International Pension risk transfer 228 115 - £0.5bn lifetime
Slide 15: Top LGR Direct Investments
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Top LGR Direct Investments Year of Book value1 Counterparty Sector investment (£m) HMRC Buildings 1 Government 2016 – 2018 764 (Birmingham/Bristol/Cardiff/Edinburgh/Glasgow/Sheffield/Stratford) 2 Places for People Property (Income Strip) 2014 298 3 The Roll
Slide 16: LGIM: Continued strong performance
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGIM: Continued strong performance FINANCIAL HIGHLIGHTS H1 2018 H1 2017 • Operating profit up 5% to £203m, while maintaining a steady Total revenue1 (£m) 412 394 cost income ratio Total expenses1 (£m) (210) (200) • External net flows of £14.6bn, with contin
Slide 17: LGIM: Increasingly diversifying business in growth segments
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGIM: Increasingly diversifying business in growth segments External net flows £14.6bn DB Flows (£bn) DC Flows (£bn) UK Retail Flows1 (£bn) International Flows (£bn) DB Index DB Solutions DB Other 33.0 24.1 4.5 11.2 3.5 3.0 2.7 2.9 3.0 2.0 14.5 1.2 1.4 1.3
Slide 18: LGIM: Continued focus and delivery on our strategic themes
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGIM: Continued focus and delivery on our strategic themes Broadening our investment capability • Driving growth in fixed income active strategies, e.g. High Yield and Emerging Market Debt • Enhancing Multi-asset and Fiduciary Management offerings • Expandi
Slide 19: LGC: Growing our assets and building profitability
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGC: Growing our assets and building profitability FINANCIAL HIGHLIGHTS H1 2018 H1 2017 • Overall LGC operating profit £172m, up 21% from H1 Net release from operations (£m) 138 119 2017, benefitting from the acquisition of Cala and growth of the existing d
Slide 20: LGI: A growing book, stable profit
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGI: A growing book, stable profit FINANCIAL HIGHLIGHTS H1 2018 H1 2017 • Operating profit of £154m, up 5% Net release from operations (£m) 157 169 • Growth in premiums: UK up 3% to £856m, US up 3% Operating profit (£m) 154 147 on USD basis to $635m - UK 13
Slide 21: GI: Strong direct premium growth
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER GI: Strong direct premium growth FINANCIAL HIGHLIGHTS H1 2018 H1 2017 • GWP growth of 12%, in a highly competitive market Net release from operations (£m) (5) 12 • Continuing to generate more than a third of total GI Operating profit (£m) (6) 15 premiums th
Slide 22: Robust capital position
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Robust capital position Coverage 189% 193% Ratio £14.6bn £14.3bn • Solvency II surplus £6.9bn £16bn • Coverage ratio 193% £14bn £6.9bn £6.9bn • Core tier 1 Own funds £11.3bn (79%) £12bn £10bn • The Solvency II figures incorporate management’s £8bn estimate
Slide 23: Movement in the Solvency II surplus
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Movement in the Solvency II surplus 8.0 £0.6bn Net Surplus Generation Solvency II Surplus (£bn) 0.2 (0.2) (0.1) 7.5 0.7 (0.7) 7.0 0.1 6.9 £0.7bn Operational Surplus Generation 6.9 6.5 Surplus Surplus from Release of Risk TMTP New Business Operating External
Slide 24: Estimated Solvency II new business value metric
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Estimated Solvency II new business value metric Contribution from H1 2018 PVNBP Margin % New Business UK Annuity business LGR (£m) 844 87 10.3 UK Insurance Total (£m) 788 56 7.1 Retail Protection 652 49 7.6 Group Protection 136 7 5.2 LGI America (£m) 411 48
Slide 25: In summary: Well positioned for growth in H2
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER In summary: Well positioned for growth in H2 Operating profit from divisions Earnings per share Cash & Treasury assets £1,059m, +7% 13.00p £4.1bn H1 17 994 H1 17 14.19 YE 17 3,435 H1 18 1,059 H1 18 13.00 H1 18 4,097 Return on Equity SII Operational surplus
Slide 26: Business update
Business update Nigel Wilson, Group Chief Executive LEGAL & GENERAL GROUP PLC | HALF YEAR RESULTS | AUGUST 2018 26
Slide 27: Our six drivers of consistent structural growth
NIGEL WILSON: GROUP CHIEF EXECUTIVE Our six drivers of consistent structural growth Growth drivers Ageing • Target record year in UK PRT market, £7bn exclusive demographics • $25bn annual US PRT opportunity • Lifetime mortgage market growing to £6bn by 2020 Globalisation of • ESG, FBI, European ETF
Slide 28: L&G sustaining long term growth
NIGEL WILSON: GROUP CHIEF EXECUTIVE L&G sustaining long term growth 100% “GROWN UPS” LGRI LGRR LGC LGIM LGI GI Mature Savings Sale agreed 20% - 49% 100% “SCALE UPS” - CALA Homes - NTR (Energy) - BTR - ETF - Pemberton - Salary Finance - LGIMA - DC / Retail - ADV - Smartr365 - LGRA - Future Cities Sal
Slide 29: Using technology & innovation to increase our presence in the housing ecosystem
NIGEL WILSON: GROUP CHIEF EXECUTIVE Using technology & innovation to increase our presence in the housing ecosystem Home Insurance Market size c.£6.4bn GWP Lifetime Mortgages Expected growth c.1% pa Market size c.£4.1bn L&G market share c.6% Expected growth c.£6bn in FY20 Refinance Protection L&G ma
Slide 30: Scale-up to Grown-up: CALA
NIGEL WILSON: GROUP CHIEF EXECUTIVE Scale-up to Grown-up: CALA 2013 2017 2018 • Initial investment in 2013 Units sold 850 1,677 2,171 • Significant operational and financial performance since Revenue (£m) 244 748 851 acquisition Expenses (£m) (222) (655) (739) • Record revenues and profits YoY EBIT
Slide 31: Scale-up: LGIMA
NIGEL WILSON: GROUP CHIEF EXECUTIVE Scale-up: LGIMA $183bn 200 US Domestic Net Flows ($bn) US DOMESTIC $99bn | INTERNAL $16bn | INT’L $68bn 160 LGIMA AUM ($bn) 120 16.2 80 12.7 11.5 10.2 9.6 40 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 2014 2015 2016 2017 H1 2018 2006 2010 201
Slide 32: Start-up to Scale-up: LGRA
NIGEL WILSON: GROUP CHIEF EXECUTIVE Start-up to Scale-up: LGRA • Since entering the US PRT market in 2015, LGRA has written nearly $2 billion spanning 28 clients • In H1 2018, LGRA wrote $297m in premium, more than double H1 2017 • The US PRT pipeline remains strong, with 2018 industry sales expecte
Slide 33: Scale-up: Salary Finance
NIGEL WILSON: GROUP CHIEF EXECUTIVE Scale-up: Salary Finance Salary Finance is a fast growing employee benefits Awards: company. By partnering with employers and deducting from payroll, Salary Finance offer a way for employees to • Named as one of the 20 Most Innovative Digital borrow sensibly and f
Slide 34: We are all technology businesses now
NIGEL WILSON: GROUP CHIEF EXECUTIVE We are all technology businesses now Technology Progress Cloud - Routinely utilising public cloud infrastructure for new projects, as well as in rationalising our existing IT estate - Unattended robotics - completing 40 different processes each day, over 50,000 ac
Slide 35: Reshaping the group has increased focus and delivered £1.3bn of cash
NIGEL WILSON: GROUP CHIEF EXECUTIVE Reshaping the group has increased focus and delivered £1.3bn of cash Status L&G shareholder proceeds IndiaFirst Life (H1 2018) Sale agreed £79m Mature Savings (H2 2017) Sale agreed £650m Insurance: Netherlands business (H1 2017) Sold €161m Savings: Cofunds (H1 201
Slide 36: LGC asset portfolio now £8.1bn: Significant optimisation opportunity
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGC asset portfolio now £8.1bn: Significant optimisation opportunity Operating £m 2015 2016 2017 H1 2018 profit Direct Investments portfolio Housing 345 392 588 1,050 Future Cities 428 591 566 589 SME Finance 94 154 296 366 Total 867 1,137 1,450 2,005 104 Traded p
Slide 37: Our financial ambition
NIGEL WILSON: GROUP CHIEF EXECUTIVE Our financial ambition Between 2011 – 2015 we achieved a 10% growth in EPS Our ambition is to replicate this performance out to 2020 • Our Strategic goals: • Achieve global leadership in pensions de-risking and provide a suite of products INVESTING & to maximise r
Slide 38: Delivering inclusive capitalism
Delivering inclusive capitalism Sharing success with investors, customers and society LEGAL & GENERAL GROUP PLC | HALF YEAR RESULTS – AUGUST 2018
Legal & General Group — H1 2018 Earnings Presentation on 6ix