Legal & General Group Plc · LSE:LGEN
Legal & General — H1 2013 Earnings Presentation
34 slides from Legal & General's earnings presentation, Aug 6, 2013
Slide 1: Half-Year Results
1 HALF-YEAR RESULTS. A PRESENTATION FROM LEGAL & GENERAL 6 August 2013 5 MACRO TRENDS, 5 WINNING STRATEGIES EVERY DAY MATTERS
Slide 2: Forward Looking Statements
2 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 uncerta
Slide 3: Nigel Wilson, Group Chief Executive
NIGEL WILSON. 3 GROUP CHIEF EXECUTIVE 5 MACRO TRENDS, 5 WINNING STRATEGIES EVERY DAY MATTERS
Slide 4: New Organisation Structure: Accelerating Growth
4 NEW ORGANISATION STRUCTURE: ACCELERATING GROWTH. Jimmy John Pollock Mark Zinkula Kerrigan Procter Paul Stanworth Atkins LGAS LGIM Annuities L&G Capital LGA • Retail Protection • Institutional • Individual • Direct Investments • US Term • Group Protection • Private Wealth • Bulk • Shareholder Funds
Slide 5: Results Summary: Financial Highlights
5 RESULTS SUMMARY: FINANCIAL HIGHLIGHTS. 1. LGIM gross flows up 66% to £25bn, net flows up 100% to £8bn 2. Bulk annuity premiums £670m (H1 2012:£67m) Individual annuity premiums up 44% to £754m (H1 2012: £522m) 3. Net cash up 23% to £500m (H1 2012: £407m) Operational cash up 14% to £537m (H1 2012: £
Slide 6: Strategic and Financial Evolution
6 STRATEGIC AND FINANCIAL EVOLUTION. 2009 and Ongoing 2012 2013 and beyond CASH: CERTAINTY AND CASH PLUS ORGANIC GROWTH PLUS SUSTAINABILITY CASH PLUS ORGANIC GROWTH SELECTIVE ACQUISITONS • Industrialised and • Identification of five key macro • Accelerated growth in annuities, automated processes dr
Slide 7: Macro Drivers of Growth
7 MACRO DRIVERS OF GROWTH. GROWTH DRIVERS GROUP RESPONSE KEY TRENDS Over 60s will grow from 600m today to over AGEING RETIREMENT PROGRESS 2 billion by 2050, Corporates move to DC and POPULATIONS SOLUTIONS derisking. Individual accountability for pensions Platforms likely to double in 5 years. Guided
Slide 8: Direct Investments: Increasing Our Risk Adjusted Return
8 DIRECT INVESTMENTS: INCREASING OUR RISK ADJUSTED RETURN. • Strong underwriting and structuring skills • Convert pipeline: We have invested in infrastructure, commercial lending, property and private equity Banks exiting Long term asset classes; investors solvency entering; weakness, attractive liq
Slide 9: Mark Gregory, Group Chief Financial Officer
9 MARK GREGORY. GROUP CHIEF FINANCIAL OFFICER FINANCIAL RESULTS: STRATEGIC DISCIPLINE EVERY DAY MATTERS
Slide 10: Strong Results on All Key Metrics
10 STRONG RESULTS ON ALL KEY METRICS. £m H1 2013 H1 2012 Growth % LGIM net flows (£bn) 8.0 4.0 100 Annuity premiums (£bn) 1.4 0.6 142 GROWTH Savings growth business net inflows (£bn) 2.3 1.3 77 Protection and GI gross premiums (£m) 872 838 4 US Protection gross premiums ($m) 503 456 10 Net cash gene
Slide 11: Accelerated Delivery of Growth
11 ACCELERATED DELIVERY OF GROWTH. OPERATIONAL CASH GROWTH NET CASH GROWTH R 7% CAG 7% CAG R £865m £958m £760m £840m +23% +14% £500m £537m 2010 2011 2012 H1 2013 2010 2011 2012 H1 2013 OPERATING PROFIT GROWTH TOTAL NB APE SALES GROWTH 4% CAGR R £1,087m 9% CAG £2,113m £1,002m £1,781m +10% +22% £571m
Slide 12: Net Cash: Scale Drives Growth
12 NET CASH: SCALE DRIVES GROWTH. Increase from each division: • LGIM: scale and fee growth + £500m low cost ratio 45% £475m • Annuities: substantial stock and positive new business £450m surplus £425m • GI: excellent combined £400m operating ratio £375m • Retail Protection: permanent £350m uplift i
Slide 13: Profit: Clear Visibility
13 PROFIT: CLEAR VISIBILITY. All in £m Op cash Strain Net cash Variances Profit after Tax Profit and other tax before tax Annuities 130 17 147 (31) 116 35 151 Housing and Protection 149 (23) 126 3 129 39 168 Investment 106 - 106 - 106 29 135 Management Savings 95 (31) 64 (18) 47 15 62 US Protection
Slide 14: LGIM: Expansion Momentum
14 LGIM: EXPANSION MOMENTUM. FINANCIAL HIGHLIGHTS £m H1 2013 H1 2012 GROWTH IN SCALE Total revenue 246 219 12% £433bn Total costs (111) (100) CAGR Operating profit 135 119 £264bn Net cash generation 106 97 Gross inflows (£bn) 24.9 15.0 Net inflows (£bn) 8.0 4.0 2008 2010 2012 H1 2013 Of which intern
Slide 15: Annuities: Responding to Demand
15 ANNUITIES: RESPONDING TO DEMAND. FINANCIAL HIGHLIGHTS £m H1 2013 H1 2012 INDIVIDUAL ANNUITIES GROWTH Operational cash generation 130 121 1 1% £1,320m A GR New business surplus 17 1 C Net cash generation 147 122 +44% £868m £754m Operating profit 151 139 Individual Annuities single premiums 754 522
Slide 16: Longevity Data and Understanding
16 LONGEVITY DATA AND UNDERSTANDING. EXPERIENCE FORWARD ASSESSMENT Internal: Legal & General longevity team including: PROGRESS 30 Years of annuity data 3 Doctorates c15,000 Deaths pa 4 Actuaries 2 Statisticians c750,000 Lives quoted pa 725,000 Current annuitants Longevity science advisory panel inc
Slide 17: Annuities: Accelerating Profitable Growth
17 ANNUITIES: ACCELERATING PROFITABLE GROWTH. MARKET DEMAND • Innovative solutions implemented efficiently Corporate DB People living de-risking: longer LDI to buyout Feb 2013: BAE Apr 2013: New Ireland: and all steps Systems: £3.2bn €136m international longevity insurance annuities Demise of DB in
Slide 18: Housing and Protection: Navigating Change
18 HOUSING AND PROTECTION: NAVIGATING CHANGE. FINANCIAL HIGHLIGHTS £m H1 2013 H1 2012 PROTECTION NB EEV MARGINS (%) Operating profit 168 150 11.8 H1 FY 10.8 Operational cash generation 149 115 9.3 New business strain (23) (33) 7.9 7.0 6.7 6.2 6.0 6.4 6.4 Net cash generation 126 82 Retail Protection
Slide 19: Savings: Gathering Assets
19 SAVINGS: GATHERING ASSETS. FINANCIAL HIGHLIGHTS £m H1 2013 H1 2012 COFUNDS AUA GROWTH Operating profit 62 72 £54bn £48bn Operational cash generation 95 88 £36bn New business strain (31) (32) Net cash generation 64 56 New business strain % PVNBP 1.8% 2.4% 2011 2012 H1 2013 New business APE 734 620
Slide 20: Disciplined Investment of Capital
20 DISCIPLINED INVESTMENT OF CAPITAL. Selective acquisitions - financial and strategic criteria, broadening our capability, or geographical expansion SELECTIVE 3 acquisitions in 2013: ACQUISITIONS CALA £65m – no goodwill, earnings accretive in its first year Cofunds £131m - earnings accretive in 201
Slide 21: Interim Dividend Up to 2.40p
21 INTERIM DIVIDEND UP TO 2.40p. % CAGR 26 7.65p 6.40p 4.75p 5.69 3.84p 4.74 3.42 2.73 1.96 2.40 1.11 1.33 1.66 2009 2010 2011 2012 H1 2013
Slide 22: John Pollock, CEO LGAS
22 JOHN POLLOCK. CHIEF EXECUTIVE OFFICER - LGAS LGAS: ACCELERATING EVOLUTION EVERY DAY MATTERS
Slide 23: LGAS: Scale + Digital = Operational Leverage
23 LGAS: SCALE + DIGITAL = OPERATIONAL LEVERAGE. UK Market leader in Protection and Savings Platforms: 6 million individual customers + 7,000 corporate customers (2.5 million members) UK PROTECTION GWP UK SAVINGS AUA
Slide 24: LGAS: Social Change Driving Growth
24 LGAS: SOCIAL CHANGE DRIVING GROWTH. RETIREMENT • Workplace Platform, H1 net inflows £0.7bn, total AUA £7.3bn SOLUTIONS • Suffolk Life, H1 net inflows £0.3bn, total AUA £5.7bn Retirement solutions • Retail Protection No1 in the UK for over a decade PROTECTION • Protection Review’s “Organisation of
Slide 25: Cofunds: Growth and Expanding Distribution
25 COFUNDS: GROWTH AND EXPANDING DISTRIBUTION. Forecast Platform Sector Growth to 2017 £54bn AUA £bn assets on platforms¹ ¹Fundscape independent market projections PROGRESS ON COFUNDS SYNERGY PLAN • Over £3m annualised cost reduction already delivered • 2013 Integration plan on track – additional sa
Slide 26: LGAS: Integration to Ensure Long Term Value
26 LGAS: INTEGRATION TO ENSURE LONG TERM VALUE. OPERATIONAL LEVERAGE • Housing and Protection - substantial cash engine • Workplace Savings - industrial processes driving scale efficiencies • Mature business - drive down costs and retain customers • Integration - drive cost and revenue synergies (in
Slide 27: Mark Zinkula, LGIM Chief Executive Officer
27 MARK ZINKULA. LGIM CHIEF EXECUTIVE OFFICER LGIM: DELIVERING OUR STRATEGY EVERY DAY MATTERS
Slide 28: Ongoing Profit and Cash Delivery
28 ONGOING PROFIT AND CASH DELIVERY. Financial highlights H1 2013 H1 2012 £m • Operating profit has increased 13% to £135m Operating profit 135 119 Total revenue 246 219 • Cost income ratio broadly Total costs (111) (100) unchanged at 45% Net inflows of £8.0bn have doubled year on year Net cash gene
Slide 29: International Expansion Continues
29 INTERNATIONAL EXPANSION CONTINUES. INTERNATIONAL AUM • Europe: Record sales in H1 with 9 new clients from the region. We plan to launch our first SICAV by the end of the year £52bn • Gulf: Strong inflows in the first half. We have a healthy pipeline for both Index £43bn and Property products • As
Slide 30: Providing UK Retirement Solutions
30 PROVIDING UK RETIREMENT SOLUTIONS. DE-RISKING JOURNEY Diversify Hedge Insure • UK net inflows were driven by strong flows of £4bn into our market leading LDI strategies • We rolled out, on a targeted basis, our digital solution to help smaller DB clients de-risk, ahead of its official launch late
Slide 31: Maximising Synergies Across the Group
31 MAXIMISING SYNERGIES ACROSS THE GROUP. Legal & General Group Synergies • L&G Investments integration into LGIM has commenced. This will allow our LGI customers to benefit Increased Leverage from LGIM’s scale and low cost allocation to LGIM LGIM products investment manufacturing expertise LGAS L&G
Slide 32: Nigel Wilson, Group Chief Executive
32 NIGEL WILSON. GROUP CHIEF EXECUTIVE EVERY DAY MATTERS
Slide 33: Accelerating Evolution
33 ACCELERATING EVOLUTION. ATTRACTIVE The triangle of prosperity replacing the triangle of austerity MACRO TRENDS – the importance of political will Retirement solutions Organisational capability aligned with strategic ORGANISATIONAL opportunities CAPABILITY Destination for talent ACCELERATING EVOLU
Slide 34: 5 Macro Trends, 5 Winning Strategies
34 5 MACRO TRENDS, 5 WINNING STRATEGIES EVERY DAY MATTERS