Legal & General Group PLC · LSE:LGEN
Legal & General — Debt Investor Presentation (March 2019)
42 slides from Legal & General's debt investor presentation, March 2019
Slide 1: Improving lives through inclusive capitalism
Improving lives through inclusive capitalism Legal & General Group Plc | Debt Investor Update | 2018 Year End Results LEGAL & GENERAL GROUP PLC | DEBT INVESTOR UPDATE | YEAR END 2018 RESULTS
Slide 2: Financial highlights
Financial highlights Operating profit from divisions1 Earnings per share1 Return on equity £2,231m 24.74p 22.7% (2017: £2,034m) (2017: 23.10p) (2017: 25.6%) +10% +7% Book value SII operational surplus generation Full year dividend £8.5bn, 143p £1.4bn 16.42p (2017: £7.5bn, 126p) (2017: £1.3bn) (2017:
Slide 3: A consistent strategy: Consistently delivering
A consistent strategy: Consistently delivering Operating profit from divisions (£m) Earnings per share (p) 11% CAGR 2011 - 2018 10% CAGR 2011 - 2018 2,500 30 2,231 2,034 24.74 1,902 25 23.10 2,000 21.22 1,702 1,483 20 18.16 1,500 16.70 1,277 1,329 15.20 1,109 15 13.84 12.42 1,000 10 500 5 0 0 2011 2
Slide 4: Structural growth drives profit
Structural growth drives profit 2018 2017 % Growth Legal & General • Actively quoting on £20bn UK PRT business, market share c.30% Retirement: 832 716 16 • c.$27bn US PRT market opportunity p.a., market share 3% Institutional1 Investing & Legal & General • LTM 30% market share Retirement: 283 199 42
Slide 5: Benefits of a diversified business model
Benefits of a diversified business model Excluding mortality release £m 2018 2017 % LGI 14% Legal & General Retirement Institutional (LGRI) 832 716 16 Legal & General Retirement Retail (LGRR) 283 199 42 Legal & General Investment Management (LGIM) 407 400 2 Operating LGRI 39% Legal & General Capital
Slide 6: Financial highlights: consistent delivery in 2018
Financial highlights: consistent delivery in 2018 Metric 2018 2017 % Operating profit from divisions excluding mortality release (£m) 2,231 2,034 10 Group debt costs (£m) (203) (191) (6) Group investment projects & expenses (£m) (126) (120) (5) Operating profit excluding mortality release (£m) 1,902
Slide 7: LGR: Consistently delivering, record £10bn annuity sales
LGR: Consistently delivering, record £10bn annuity sales Financial Highlights FY 2018 FY 2017 • Operating profit excluding mortality releases Release from operations (£m) 551 508 £1,115m up 22%, reflecting: New business surplus (£m) 217 180 - Strong performance from back book Net release from operat
Slide 8: LGR: Change in mortality tables as improvement rate slows
LGR: Change in mortality tables as improvement rate slows Changes to mortality assumptions in 2018* • Adopted the CMI 2016 model for projecting mortality improvements in H2 2018 • Reflects an expectation of lower mortality CMI 2014 improvement rates in the short and medium term • Expected long term
Slide 9: LGRR: New Business
LGRR: New Business Total Sales (£m) FY 2018 FY 2017 • Individual annuities up 18% to £795m following significant improvement to our enhanced annuity proposition Individual annuities 795 671 New lifetime mortgages 1,197 1,004 • £1.2bn lifetime mortgage sales up 19%, driven by strong distribution part
Slide 10: LGRI: New Business – Record year
LGRI: New Business – Record year • £9bn+ premium for global bulk annuity transactions including: Total Sales (£m) FY 2018 FY 2017 UK Pension risk transfer 8,351 3,405 • £4.4bn buy-in with British Airways – UK’s largest International Pension risk transfer 789 543 • £2.4bn PPF+ buy-out with Nortel Net
Slide 11: LGR diversified portfolio, high quality assets
LGR diversified portfolio, high quality assets LGR Asset portfolio Asset portfolio maintaining overall credit 2017 2018 quality and high sectorial diversification* £58.2bn £63.0bn AAA, 7% • 17% in Sovereign-like assets AA, 25% • c.2/3rd A rated or better 17% 75% 20% A, 35% 79% • Credit default reser
Slide 12: LGR diversified, high quality assets: Direct Investments
LGR diversified, high quality assets: Direct Investments Wide spectrum of Direct Investment classes Diversified portfolio maintained good overall credit rating Real Estate Debt, 16% AAA, 14% Infrastructure, 21% 2018 AA, 17% Lifetime Mortgages, 20% DI by Direct Credit A, 34% Private Corporate Debt, 1
Slide 13: LGRA: Successful international expansion
LGRA: Successful international expansion Fast growing US PRT sales …in a buoyant US buyout market 2015 $14bn 2015 $445m 2016 $448m 2016 $14bn 2017 $713m 2017 $23bn 2018 $844m 2018 $27bn • In 2018, LGRA wrote $844m in premium, 18% increase vs • The US PRT market grew 18% to $27 billion in 2018 2017 a
Slide 14: LGIM: Financials
LGIM: Financials Financial Highlights FY 2018 FY 2017 • Operating profit up 2% to £407m Asset management revenue1 (£m) 840 805 • Asset management revenues grew by 4%, despite adverse market conditions Asset management expenses1 (£m) (433) (405) Total LGIM operating profit (£m) 407 400 • Asset manage
Slide 15: LGIM: Continued diversification of the business
LGIM: Continued diversification of the business External net flows £43bn DB Flows (£bn) DC Flows (£bn) UK Retail Flows (£bn) International Flows (£bn) 15 10 8.4 4 40 11.8 2.8 10 19.6 5 2 20 5 0 0 0 0 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 • UK DB clients de-risking • AUM increas
Slide 16: LGIM: Continuation of positive momentum in the US
LGIM: Continuation of positive momentum in the US US AUM ($bn) 14% CAGR 2014 - 2018 250 • Total US AUM of $192bn, a 2% increase from 2017 200 192 • Domestic client net flows of $15bn (2017: $16bn) 189 • 417 external US clients, 23% increase on 2017 (338) 147 150 • Robust demand for US Fixed Income,
Slide 17: LGC: Financials
LGC: Financials • Overall LGC operating profit £322m, up 18%, led Financial Highlights FY 2018 FY 2017 by increased Direct Investment portfolio including Operating profit (£m) 322 272 the full ownership of CALA - Direct Investments 188 124 Direct Investments - Traded portfolio and other 134 148 • To
Slide 18: LGC: Strong year for growth
LGC: Strong year for growth Utilise shareholder capital to deliver new investment to drive growth Significant investment in 2018 Our investment strategy CALA £315m invested - Sectors with shortage of long term capital Bruntwood SciTech £250m commitment, (£116m drawn) - L&G has relevant skill set - A
Slide 19: LGI: Financials
LGI: Financials Financial Highlights FY 2018 FY 2017 • Operating Profit of £308m, a 2% increase on prior year, continuing to contribute stable profits to the Net release from operations (£m) 236 275 Group Operating profit (£m) 308 303 • Strong new business growth across the division, up 246 209 14%
Slide 20: General Insurance: Financials
General Insurance: Financials Financial Highlights FY 2018 FY 2017 • Premium up 11% to £410m, in a competitive market Operating profit (£m) 0 37 Profit before tax (£m) (27) 43 • Direct channel share of total premiums at 36% Gross written premium (£m) 410 369 • Profit impacted by a number of severe w
Slide 21: Solvency II Balance sheet: Robust capital position
Solvency II Balance sheet: Robust capital position Shareholder coverage ratio • Solvency II surplus of £6.9bn YE 2017 YE 2018 • Coverage ratio of 188% 189% 188% 16 • Core tier 1 Own funds of £11.5bn (78%) 14 £14.6bn £6.9bn £14.8bn £6.9bn • As at 4th March 2019, and excluding £400m of subordinated de
Slide 22: Movement in the Solvency II Surplus
Movement in the Solvency II Surplus Solvency II Surplus analysis of change (£bn) £0.9bn Net Surplus generation 9 0.4 0.4 8 0.5 0.1 1.4 0.9 7 0.5 0.4 6.9 £1.4bn Operational Surplus generation 6.9 6 Surplus Surplus from Release of TMTP New Operating External Market Subordinated Surplus YE 2017 back-bo
Slide 23: Estimated Solvency II new business value metric
Estimated Solvency II new business value metric Contribution from Business PVNBP (£m) Margin1 % new business (£m) UK Annuity business (LGR) 9,148 722 7.9 UK Insurance Total (LGI) 1,609 115 7.1 Retail Protection 1,271 93 7.3 Group Protection 338 22 6.4 LGI America (LGI) 854 96 11.2 Sub-total 11,611 9
Slide 24: Debt instruments summary
Debt instruments summary Debt Redemption Profile (£m)1 Rating Type Entity / Instruments Moody’s S&P Financial L&G Assurance Strength Aa3 AA- Society Ltd Rating L&G Finance plc / Instrument A2 A Senior Credit Ratings L&G Group plc / A3 BBB+ Tier 2 Outlook Stable Stable Rating Amount Coupon Issue Date
Slide 25: Cash position: £1.5bn surplus liquidity available for investment
Cash position: £1.5bn surplus liquidity available for investment Group liquidity resources Group liquidity requirements £1.5bn Surplus liquidity £2.5bn Traded portfolio Cash & short-dated Gilts 2019 dividend payments OpEx reserve £1.9bn Treasury assets Collateral requirements Coupon payments Debt re
Slide 26: Group Strategy
Group Strategy LEGAL & GENERAL GROUP PLC | DEBT INVESTOR UPDATE | YEAR END 2018 RESULTS
Slide 27: Growth compounders
Growth compounders Growth drivers Opportunity L&G impact Ageing • UK PRT market volumes of £30bn expected to be the new norm • UK PRT, c.30% market share demographics • c.$27bn annual US PRT opportunity • Continue to build on success in the US • Opportunities in the Netherlands, Ireland and Canada •
Slide 28: Moving into high growth, high return businesses – many growth opportunities to seize
Moving into high growth, high return businesses – many growth opportunities to seize LGR LGC LGIM Insurance SME Fund PRT Retail Housing Future Cities Life GI Finance Management UK USA Europe Asia • UK – Strategic roll out is completed – Execution is key • USA/Canada – Growth options created – Accele
Slide 29: Delivering inclusive capitalism
Delivering inclusive capitalism Our ambition is to replicate this Between 2011 – 2015 we performance out to 2020: achieved a 10% growth in EPS 11% achieved to date • Achieve global leadership in pensions de-risking and provide a suite of Investing & products to maximise retirement income Annuities •
Slide 30: Appendix
Appendix LEGAL & GENERAL GROUP PLC | DEBT INVESTOR UPDATE | YEAR END 2018 RESULTS
Slide 31: LGRR: New business doubled since 2016
LGRR: New business doubled since 2016 Operating Profit (£m) 2016 2017 2018 Operating Profit (excl. longevity release) 158 199 283 Individual Annuities premiums (£m) Lifetime Mortgages advances (£m) Introduction of new 1,197 products and new bank partnerships with 1,004 NatWest and Virgin Improved un
Slide 32: LGIM: Long term strategic goal
LGIM: Long term strategic goal Three fundamental themes • Driving growth in fixed income active strategies, e.g. High Yield and Emerging Market Debt 1. Broadening our • Enhancing Multi-Asset and Fiduciary Management offerings investment capability • Expanding Real Assets global capability • Innovati
Slide 33: LGC: Future Cities strategy
LGC: Future Cities strategy Making a positive difference to the UK economy • Since 2015, LGC has committed over £600m to UK regeneration schemes worth over £6bn. Funding the creation of: ‒ over 3.0m sq. ft. of commercial space ‒ tens of thousands of jobs in Bracknell, Cardiff, Leeds, Newcastle and M
Slide 34: LGC Vision of a future city
Energy grid & storage system Smart Later Living Scale-up university centre LGC Vision of a future city accommodation science park public partnership Ecotech cluster VC backed fintech New modular homes factory on outskirts Data centre Modern retail experiences Next generation Smart workplaces designe
Slide 35: Leeds
Leeds Legal & General Capital activities 1 4 4 Innovative design and build: Modular 1 BTR scheme: Leeds City Centre factory 5 2 2 5 Technology and innovation: Bruntwood Modern commercial & retail: The Springs SciTech – The Platform 3 3 Solar and wind generation: Derbyshire and Yorkshire 35 LEGAL & G
Slide 36: Manchester
Manchester Legal & General Capital activities 3 1 University science and technology: 1 Bruntwood SciTech - Bright Building 2 3 4 5 4 BTR scheme: Salford 2 International hub for technology and innovation: MediaCity 5 Mixed-use development: Salford New Bailey Innovation hub: Bruntwood SciTech - Cityla
Slide 37: Infrastructure supporting Future Cities
Infrastructure supporting Future Cities Legal & General Capital activities 1 3 1 Data centres: KAO Clean energy generation: NTR 4 2 4 3 Solar solutions: Oxford PV Electric vehicle charging: Pod Point 2 37 LEGAL & GENERAL GROUP PLC | DEBT INVESTOR UPDATE | YEAR END 2018 RESULTS
Slide 38: LGC: Three dimensions of freedom
LGC: Three dimensions of freedom with L&G’s Homes Build to Later life living Executive sell homes Traditional and modern First time methods of Social buyer Build to Housing rent construction 38 LEGAL & GENERAL GROUP PLC | DEBT INVESTOR UPDATE | YEAR END 2018 RESULTS
Slide 39: LGC: What next?
LGC: What next? Future Cities Housing Investing in SMEs • Extend across more UK cities • Delivery and execution of • Selectively support “Start • Explore concept applicability Three Dimensions of ups” to “Scale ups” strategy to the US Freedom housing strategy 39 LEGAL & GENERAL GROUP PLC | DEBT INVE
Slide 40: L&G's UK Retirement ecosystem
L&G’s UK Retirement ecosystem Our aim is to become the UK’s leading provider UK PRT LGRI DB of retirement financial and housing solutions Payments US PRT Retirement income LGRR Individual Individual annuities Fixed Term L&G Personal Investing Retirement Retirement Workplace & DC savings Ecosystem Re
Slide 41: Biographies
Biographies Jeff was appointed Group Chief Financial Officer on 9 March 2017. He was previously an actuarial partner at EY, with leadership roles in UK and Continental Europe. Prior to joining EY in 2004, he held a number of senior actuarial roles at Swiss Re Life & Health. He is a Fellow of the Ins
Slide 42: 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
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