Legal & General Group Plc · LSE:LGEN
Legal & General — FY2016 Earnings Presentation
45 slides from Legal & General's earnings presentation, March 2017
Slide 1: Creating for a more secure future
Creating for a more secure future LEGAL & GENERAL GROUP PLC | YEAR END RESULTS - MARCH 2017 WAP JOKN SPEEDO GAERDYOD JOHN PEED'S
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: Earnings per share, return on equity, full year dividend
Earnings per share Return on equity Full year dividend 22.20p 19.6% 14.35p
Slide 4: Strengthening our board and management team
NIGEL WILSON: GROUP CHIEF EXECUTIVE Strengthening our board and management team Who New Position Background Sir John Kingman Philip Broadley Toby Strauss Lesley Knox Kerrigan Procter Bernie Hickman Aaron Meder Chery! Agius Chris Knight Anton Eser Jeff Davies Helena Morrissey Garvan O'Neill Stephen H
Slide 5: Net release from operations, operating profit, profit after tax
Net release from operations Adjusted operating profit Profit after tax £1,411m £1,628m £1,265m Earnings per share1 IFRS return on equity2 Full year dividend 22.20p 19.6% 14.35p
Slide 6: Net release from operations and dividend history
2012 2013 2014 2015 2016 NET RELEASE FROM 846 865 1,002 1,104 1,256 1,411 OPERATIONS (£m) DIVIDEND (£m) 375 452 550 668 797 854 NET RELEASE FROM 471 413 452 436 459 557 OPERATIONS RETAINED (£m) DIVIDEND COVERAGE 2.26 1.91 1.82 1.65 1.58 1.65 DIVIDEND PER SHARE (p) 6.40 7.65 9.30 11.25 13.40 14.35 RE
Slide 7: Growth drivers and 2016 achievements
Growth drivers 2016 achievements Ageing • • demographics • • Globalisation of • • asset markets • • • • Creating real assets • • • Welfare reforms • • • • Technological • • innovation • Today’s capital • •
Slide 8: Consistent earnings and dividend growth
Growing net release from operations (£m) Consistent earnings per share growth1 (p) 1,411 22.20 1,256 1,104 18.58 1,002 16.70 865 15.20 13.84 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Increasing dividend per share (p) Increasing return on equity1 (%) 14.35 19.6 13.40 17.7 11.25 16.9 16.1 9.30
Slide 9: Net release from operations, operating profit, profit before tax
Net release from operations Operating profit Profit before tax £1,411m £1,628m £1,582m
Slide 10: Assets & premiums, cash & capital, earnings
2016 2015 YoY (%) ASSETS & PREMIUMS CASH & EARNINGS CAPITAL
Slide 11: Operating profit from divisions
Operating profit from divisions (£m) 3% 5% LGR 1,902 1,702 17% LGIM 1,483 43% LGC 1,277 1,329 LGI 13% General Insurance Savings 19% 2012 2013 2014 2015 2016 DIVISION 2016 2015 YoY (%) Legal & General Retirement (LGR) 811 641 27 Legal & General Investment Management (LGIM) 366 355 3 Legal & General C
Slide 12: AUM, assets, premium and direct investment growth
LGIM AUM growth (£bn) LGR assets growth (£bn) 894 54.4 746 44.2 43.4 694 612 34.4 543 32.2 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 UK & US Insurance premium growth (£bn) Direct Investments (£bn) 10.0 2.7 7.2 2.6 2.5 5.7 2.4 2.2 2.7 1.3 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Slide 13: Dividend
DIVIDEND 14.35p 13.40p 11.25p 9.30p 7.65p 6.40p 10.35p 9.95p 8.35p 6.90p 4.74p 5.69p 1.66p 1.96p 2.40p 2.90p 3.45p 4.00p 2011 2012 2013 2014 2015 2016
Slide 14: Financial highlights
FINANCIAL HIGHLIGHTS 2016 2015 • • •
Slide 15: Financial highlights
FINANCIAL HIGHLIGHTS 2016 2015 • • • • •
Slide 16: Financial highlights: LGI US dividend
FINANCIAL HIGHLIGHTS 2016 2015 • • • • LGI US dividend ($m) • $91m $100m • $83m $76m $63m $69m •
Slide 17: Financial highlights
FINANCIAL HIGHLIGHTS 2016 2015 • • • •
Slide 18: Financial highlights
FINANCIAL HIGHLIGHTS 2016 2015 • • • • •
Slide 19: Capital position: Economic Capital and Solvency II
CAPITAL POSITION • Coverage Ratio 230% 235% 230% 176% 163% 171% • £13.5bn £14.0bn £14.6bn £12.8bn £13.6bn £13.6bn £14bn £8.3bn • £8.1bn £5.3bn £5.7bn £7.6bn £12bn £5.5bn £10bn • £8bn £8.3bn • £7.9bn £7.3bn £6bn £6.3bn £5.9bn £5.9bn £4bn £2bn £0bn YE 2015 H1 2016 YE 2016 YE 2015 H1 2016 YE 2016 Econo
Slide 20: Operational surplus generation
2016 Comments £bn Operational surplus generation 1.2 • • New business strain (0.1) • Net Surplus Generation 1.1 Dividends paid (0.8) • Operating variances 0.2 Market movements (0.3) Total Surplus over year 0.2
Slide 21: FY 2016 PVNBP and contribution from new business
Contribution FY 2016 PVNBP from New Margin % Business 6,661 693 10.4 1,466 153 10.4 1,255 139 11.1 211 14 6.6 631 78 12.4 8,758 924 10.6 • • • • •
Slide 22: Operating profit, new business sales, AUA
Operating profit New business sales AUA £811m £8.5bn £54.4bn
Slide 23: Financial highlights
FINANCIAL HIGHLIGHTS 2016 2015 • •
Slide 24: Back book for cash and capital
Back book for cash • and capital • Back book acquisitions • • • UK capital efficient • • front book • Longevity Insurance • • US pension risk transfer • • Global reinsurance hub • Individual retirement • • Lifetime mortgage • •
Slide 25: Profit before tax, internal and external
£1,277m £591m Internal External £327m £378m 2013 2014 2015 2016 • • • • •
Slide 26: Sales and market share
Sales £m Market share % 800 50 40 600 29% in 2016 30 400 20 200 10 0 0 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 L&G Others L&G Market Share • • • • • •
Slide 27: Increasing proportion of direct investments
INCREASING PROPORTION OF DIRECT .. WHILST MAINTAINING OVERALL CREDIT QUALITY & INVESTMENTS HIGH SECTORAL DIVERSIFICATION • BB or below • 2016 by • Credit Rating 2016 by Sector
Slide 28: AUA, direct investments, annuity premium, profit before tax
New direct investments (£m) AUA (£bn) 620 54 1,668 44 43 201 1,531 1,211 32 34 1,140 590 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Annuity single premium (£m) Profit Before Tax (£m) 847 591 3,3231 719 495 1,277 5,987 373 327 1,320 3,685 2,812 2,417 239 1,019 2012 2013 2014 2015 2016 2012 201
Slide 29: AUM, total net flows, operating profit
AUM Total net flows Operating profit £894bn £31.2bn £366m
Slide 30: Revenue growth with a steady margin
REVENUE GROWTH WITH A STEADY MARGIN • 800 £744m 70 65 600 60 • 55 £378m 49% • 400 50 46% 45 200 40 • 35 0 30 2010 2011 2012 2013 2014 2015 2016 Revenue Expenses C:I Ratio • FINANCIAL HIGHLIGHTS 2016 2015 • •
Slide 31: AFI, Solutions, Index and Real Assets AUM
Solutions AUM (£bn) AFI AUM1 (£bn) Index AUM (£bn) Real Assets AUM2 (£bn) 411.9 319.8 134.8 19.6 338.2 18.3 293.3 102.9 106.8 88.7 14.5 232.5 12.0 274.8 274.3 269.8 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 • • • • •
Slide 32: UK DB pension solutions journey
UK DB PENSION SOLUTIONS JOURNEY Funding Buy-out level c.£2.1trn DGFs buy-out liabilities 63% DGFs Buy and Smart Maintain Equities Beta Credit Multi-Strat Real Assets Credit Credit LDI Gilts LDI Time MARKET OUTCOME SELF BENCHMARK ORIENTATED INSURANCE SUFFICIENCY • • •
Slide 33: DC AUM and AUA growth, DC clients, Retail AUM
DC AUM and AUA growth (£bn) DC client growth Retail AUM (£bn) DC AUM 9,493 57 46 24 41 20 34 17 18 28 13 21 2,153 2,241 15 8 11 473 6 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 • • • • • • •
Slide 34: International AUM growth and net flows
International AUM Growth (£bn) • 250 280 252 260 240 200 £177bn 220 200 • 180 160 150 140 120 100 80 • 100 60 46 40 20 0 50 £43bn -20 -40 -60 -80 0 -100 2012 2013 2014 2015 2016 • Other International Assets US Assets US Clients • International Net Flows (£bn) £14.5bn • • £8bn • 2012 2013 2014 2015 2
Slide 35: Operating profit, profit before tax, total assets
Operating profit DI Profit before tax Total assets £257m £94m £6,193m
Slide 36: Financial highlights
FINANCIAL HIGHLIGHTS 2016 2015 • • • •
Slide 37: What we do and how we achieve this
What we do How we achieve this Maximise risk • adjusted returns • • Create new • asset classes and • business models • Provide investment • opportunities for • • the Group Internal Acquire Develop Sell External
Slide 38: Acquire, Develop, Sell
• Acquire • • • Develop • • • • Sell • •
Slide 39: Operating profit and direct investments
Operating Profit – LGC total (£m) Total Assets - Direct Investments (£m) 257 1,137 179 351 2013 2016 2013 2016 Operating Profit – Direct Investments (£m) Net portfolio return – Direct Investments (%) 9.0% 121 4.7% 23 2013 2016 2013 2016
Slide 40: Sector and macro theme: housing, infrastructure, SME finance
Sector Macro theme Scaling up Developing new businesses businesses Housing • • • • • • • • • • • Infrastructure • • • • • • • • SME Finance • • • • • •
Slide 41: Earnings per share, return on equity, full year dividend
Earnings per share Return on equity Full year dividend 22.20p 19.6% 14.35p
Slide 42: De-cluttering our business has increased focus
NIGEL WILSON: GROUP CHIEF EXECUTIVE De-cluttering our business has increased focus Legal & General International Ireland — investment bonds (H2 2015) Sold £15m Legal & General Germany (H2 2016) Sold - Xperience: Estate agency business (H2 2014) Sold £6m Insurance: France business (H2 2015) Sold £159
Slide 43: What we are doing
“What we are doing” 2016 2017 onwards Robotics • • • • Big Data • • Platforms • • • Cloud • • • Artificial Intelligence • Blockchain
Slide 44: Earnings per share and net release from operations to 2020
Earnings per share (p) • 22.20 18.58 • 16.70 15.20 13.84 12.42 • 2011 2012 2013 2014 2015 2016 2020 • Net release from operations (£m) 1,411 • 1,256 1,104 1,002 846 865 • 2011 2012 2013 2014 2015 2016 2020
Slide 45: Creating for a more secure future
Creating for a more secure future LEGAL & GENERAL GROUP PLC | YEAR END RESULTS - MARCH 2017