Legal & General Group Plc · LSE:LGEN
Legal & General — Morgan Stanley European Financials Conference 2015
23 slides from Legal & General's conference presentation, 2015
Slide 1: Legal & General – Morgan Stanley European Financials Conference 2015
Legal & General Nigel Wilson Morgan Stanley European Financials Conference 2015 LEGAL & GENERAL GROUP PLC
Slide 2: Forward looking statements
Forward looking statements This document may contain certain forward-looking statements relating to Legal & General Group, its plans and its current goals and expectations relating to future financial condition, performance and results. By their nature, forward-looking statements involve uncertainty
Slide 3: Quantitative Easing, or Financial Indigestion?
Quantitative Easing, or Financial Indigestion? SLOW OR NO • Still a personal recession for many people in Western economies GROWTH FOR MANY • No real wage growth as no productivity growth • QE has driven up asset prices and allowed governments to over-consume • Banking, Insurance and Fund management
Slide 4: QE, Helicopter Money or Positive, Slow Money?
QE, Helicopter Money or Positive, Slow Money? “Abandon helicopters. Use bombers. Bomb “If QE had been proper money creation, with Germany, France, Italy, Greece, the entire cash going into the pockets of people or the coffers of businesses, it might have sparked Eurozone. Bomb them with banknotes, s
Slide 5: Real wages, productivity and population
Real wages, productivity and population Past 50 years: Annual Labour Growth 1.7% Annual Productivity Growth 1.8% Next 50 Years: Annual Labour Growth 0.3% At 1.8% productivity growth, GDP growth will be 40% lower LEGAL & GENERAL GROUP PLC
Slide 6: Long term direct investments
Long term direct investments £15bn Direct investment programme, with £5.7 billion invested to date We’ve already made multi-million investments into student accommodation over the last three years, funding high-quality developments, with long leases, backed by premium universities in first- class lo
Slide 7: Slow Money: Media City, Salford
Slow Money: Media City, Salford • Investment in a £500m Development • LGC Net Cash: £162m • Part of our £5.7bn Direct Investments • LGC Operating Profit: £203m • Illiquidity boosts risk-adjusted returns LEGAL & GENERAL GROUP PLC
Slide 8: Digital Delivery: Revolutionary Growth
Digital Delivery: Revolutionary Growth • Industrialisation of FS Manufacturing and Distribution • Lower, more transparent prices for customers • Smaller profit pools shared between fewer players • New profit pools emerging LEGAL & GENERAL GROUP PLC
Slide 9: Industrialisation of manufacturing and distribution
Industrialisation of manufacturing and distribution • Historically industry slow to implement new technology • Insurance industry lags behind for online experience • Adoption of digital technology is set to accelerate LEGAL & GENERAL GROUP PLC
Slide 10: Providing our retirement customers with freedom & choice
Providing our retirement customers with freedom & choice • Housing, • Lifetime • Placeholder Mortgages Freedom • • & Choice • Policy • changes • Placeholder LEGAL & GENERAL GROUP PLC
Slide 11: Typical personal balance sheet at retirement
Typical personal balance sheet at retirement ASSETS (£’000) 180 200 80 15 20 c.495 LEGAL & GENERAL GROUP PLC
Slide 12: Beyond April 2015: existing profit pools will shrink
Beyond April 2015 EXISTING PROFIT POOLS WILL SHRINK – NEW POOLS WILL EMERGE AS MARKET SIZE INCREASES MARKET SIZE PROFIT POOL ** £1.4bn £1.2bn £1.2bn £0.1bn £1.0bn £1.1bn £0.8bn £0.6bn £0.4bn £0.2bn £0.0bn 2013 2016 LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2015
Slide 13: The changing landscape for UK pension savings
The changing landscape for UK pension savings DEFINED CONTRIBUTION SAVINGS 3,500 • Increase in DC savings driven by auto-enrolment, with 12 million 3,000 individuals ultimately expected to be enrolled in workplace savings 2,500 schemes, compared to c.5 million 2,000 today. £bn • Statutory minimum co
Slide 14: Growth potential of UK DC Workplace market
Growth potential of UK DC Workplace market UK DC Workplace bundled and UK DC Workplace market potential unbundled market • Combined LGAS and LGIM bundled and unbundled share of total UK Workplace DC market was 14% in 2013 13% • UK DC market at least 12% year on year growth, driven by: CAGR • auto-en
Slide 15: Comprehensive suite of de-risking solutions
Comprehensive suite of de-risking solutions LEGAL & GENERAL IN US LEGAL & GENERAL IN RETIREMENT LDI & Active Longevity Passive multi-asset Buy-in Buy-out Fixed insurance funds LEGAL & GENERAL INVESTMENT MANAGEMENT Index funds Active fixed interest Solutions1 Longevity insurance2 Buy-in Buy-out ASSET
Slide 16: Unaffordable Welfare, Beveridge 2.0 and “Generation Y”
Unaffordable Welfare, Beveridge 2.0 and “Generation Y” “Europe accounts for just over 7% of the world’s population, produces around 25% of global GDP and has to finance c.50% of global social spending... It’s obvious it will have to work very hard to maintain its prosperity and way of life” Angela M
Slide 17: Four steps to Beveridge 2.0
Four steps to Beveridge 2.0 Saving / (cost) to Government Net saving to UK Government of £6.8 billion LEGAL & GENERAL GROUP PLC
Slide 18: Regulatory changes
Regulatory changes Financial regulators and interested parties, just affecting us in the UK: Bank of England Financial Services Compensation Scheme Competition and Prudential Regulation Markets Authority Authority EU Council Financial Stability Board European Banking Authority Money Advice Service U
Slide 19: Clear and focused strategy
Clear and focused strategy GROWTH DRIVERS 2014 ACHIEVEMENTS AGEING • LGR annuity transactions over £8.5bn including two of the largest ever UK bulk deals POPULATIONS • Workplace assets over £11bn, up 28% • LDI assets of £293bn, up 26% GLOBALISATION OF • International assets of £129bn, up 110%* ASSET
Slide 20: Financial highlights for 2014
Financial highlights for 2014 Annuity assets LGIM assets UK Protection GWP £44bn £709bn £1.4bn Net cash generation Operational cash generation Operating profit £1,104m £1,101m £1,275m Profit before tax Profit after tax Earnings per share £1,238m £992m 16.70p IFRS return on equity Full year dividend
Slide 21: Consensus Dividend Expectations
Consensus Dividend Expectations Legal & General Dividend Consensus 16.0 Prospective 14.49p 2015E dividend 14.0 13.31p 13.10p yields: 12.0 Actual: 11.25p 11.20p L&G1: 4.5% pence 10.62p FTSE 100: 3.9% 10.0 8.97p Actual: 9.30p Dow Jones: 2.4% 9.29p S&P 500: 2.0% 8.0 Actual: 7.65p 6.61p 7.48p 6.0 5.23p
Slide 22: Further significant progress, however more to do in 2015
Further significant progress, however more to do in 2015 DIVISIONS 2014 OPERATIONAL 2015 GUIDANCE 2015 KEY ACTIONS CASH £m £m • LGR 292 340 • • Insurance excl. GI 286 290 • • Savings1 127 135 • • LGA 46 50 • • LGC 162 170 • • LGIM1 275 • • GI 46 • Group debt costs (112) (116) Other costs (21) Total
Slide 23: Sustained growth 2015 – 2019
Sustained growth 2015 – 2019 • Doubling size of LGIMA assets • Direct investments to exceed £15bn • Establishing LGR’s international business • Grow UK GWP at twice UK GDP • Building market leading position in UK DC • Creating new business segment in housing and urban regeneration • Launching a mobi
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