Legal & General Group Plc · LSE:LGEN
Legal & General — FY2017 Earnings Presentation
42 slides from Legal & General's earnings presentation, March 2018
Slide 1: Delivering inclusive capitalism
Delivering inclusive capitalism Sharing success with investors, customers and society LEGAL & GENERAL GROUP PLC | YEAR END RESULTS – MARCH 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: continuing strong financial performance
NIGEL WILSON: GROUP CHIEF EXECUTIVE Financial highlights: continuing strong financial performance Operating profit Profit before tax Earnings per share1 £2,055m £2,090m 31.87p (2016: £1,562m) (2016: £1,582m) (2016: 21.22p) +32% +32% +50% IFRS return on equity1 Net release from continuing operations2
Slide 4: Key financials: strong growth, attractive returns
NIGEL WILSON: GROUP CHIEF EXECUTIVE Key financials: strong growth, attractive returns 2011 2012 2013 2014 2015 2016 2017 CAGR OPERATING PROFIT (£m) 1,053 1,087 1,158 1,275 1,455 1,562 2,055 12% NET RELEASE FROM 846 865 1,002 1,104 1,256 1,411 1,454 9% OPERATIONS1 (£m) DIVIDEND (£m) 375 452 550 668 7
Slide 5: EPS performance: consistent with longer term ambition
NIGEL WILSON: GROUP CHIEF EXECUTIVE EPS performance: consistent with longer term ambition EPS: 23.10p (excluding mortality release and US tax) 4.15 31.87 4.62 23.10 21.22 2016 2017 EPS Mortality release US tax 2017 EPS excl. US tax EPS & mortality releasee • 2017 EPS of 31.87p, 50% higher than 2016
Slide 6: Reshaping the group has increased focus
NIGEL WILSON: GROUP CHIEF EXECUTIVE Reshaping the group has increased focus Status Proceeds Mature Savings (H2 2017) Sale agreed £650m Insurance: Netherlands business (H1 2017) Sold €161m Savings: Cofunds (H1 2017) Sold £147.5m Legal & General Germany (H2 2016) Sold - Savings: Suffolk Life Group Lim
Slide 7: A clear strategy redefined: delivering inclusive capitalism
NIGEL WILSON: GROUP CHIEF EXECUTIVE A clear strategy redefined: delivering inclusive capitalism Reshaping of the Group leading to three focused business areas: Division CEO Legal & General Laura Mason Retirement: Institutional INVESTING & Legal & General Chris Knight L&G’s Strategic ANNUITIES Retire
Slide 8: Excellent execution: clear and consistent strategy
NIGEL WILSON: GROUP CHIEF EXECUTIVE Excellent execution: clear and consistent strategy Growth drivers 2017 achievements Ageing • £6.4bn LGR transactions, including 15 US pension de-risking transactions demographics • Over £1bn Lifetime mortgages sales, market leader, 33% market share • Solutions ass
Slide 9: Financial Highlights
Financial Highlights Jeff Davies, Group Chief Financial Officer Operating profit Earnings per share Earnings per share excl. mortality release and US tax £2,055m 31.87p 23.10p +32% +50% +9% LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2018 9
Slide 10: Consistent delivery: strong results
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Consistent delivery: strong results 2017 2016 % Operating profit (£m) 2,055 1,562 32 Operating profit from continuing operations (£m) 1,948 1,447 35 Mortality release (£m) 332 - n/a Operating profit from continuing operations excl. mortality release (£m) 1,
Slide 11: Full year dividend up 7% to 15.35p
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Full year dividend up 7% to 15.35p DIVIDEND Final Interim 15.35p 14.35p 13.40p 11.25p 9.30p 7.65p The group has a 6.40p progressive dividend 10.35p 11.05p policy, reflecting its 9.95p 8.35p medium term 6.90p 4.74p 5.69p underlying business growth, including
Slide 12: Benefits of a diversified business model
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Benefits of a diversified business model GI LGI 2% 13% Operating LGRI LGC 40% 12% profit from continuing divisions £2,259m LGIM 18% LGRR 15% Excl. mortality release Operating Profit (£m) 2017 2016 % 2017 % Legal & General Retirement Institutional (LGRI) 906
Slide 13: LGR: Consistently delivering
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGR: Consistently delivering FINANCIAL HIGHLIGHTS 2017 2016 • Operating profit of £1,247m up 54%, reflecting: Release from operations (£m) 508 432 New business surplus (£m) 180 159 - Strong performance from front and Net release from operations (£m) 688 591
Slide 14: LGR: Change in mortality tables as improvement rate slows
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGR: Change in mortality tables as improvement rate slows Changes to mortality improvement • Release of £126m in H1 2017 in respect of assumptions in 2017* base mortality • H2 2017 reviewed the appropriateness of CMI 2014 the CMI 2015 model for mortality im
Slide 15: LGR: Continued strong momentum, significant opportunity
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGR: Continued strong momentum, significant opportunity TOTAL SALES (£m) 2017 2016 Total new business sales of £6.4bn Backbook acquisition - 2,945 - Annuity premium of £4.6bn as demand UK Pension risk transfer 3,405 3,338 remains strong, in particular US PR
Slide 16: LGR: Defensive and well diversified asset portfolio
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGR: Defensive and well diversified asset portfolio INCREASING PROPORTION OF DIRECT .. WHILST MAINTAINING OVERALL CREDIT QUALITY & INVESTMENTS HIGH SECTORAL DIVERSIFICATION 2016 2017 BB or below • 20% of bond portfolio in £54.4bn £58.2bn Sovereign-like asse
Slide 17: LGIM: Continued strong performance
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGIM: Continued strong performance FINANCIAL HIGHLIGHTS FY 2017 FY 2016 • Operating profit up 9% to £400m, while Operating profit1 (£m) 400 366 maintaining a steady cost income ratio Total revenue (£m) 805 730 • Strong flows across regions, channels and Tot
Slide 18: LGIM: Record international net inflows
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGIM: Record international net inflows International AUM Growth (£bn) International Net Flows (£bn) 40% CAGR £228bn 33.0 15.7 14.5 £43bn 9.6 7.8 8.5 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Other International US • Total International AUM
Slide 19: LGC: Growing our assets and building profitability
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGC: Growing our assets and building profitability FINANCIAL HIGHLIGHTS FY 2017 FY 2016 • Overall LGC operating profit Net release from operations (£m) 224 214 £272m, up 6% from 2016 • Direct Investments portfolio now Operating profit (£m) 272 257 £1,450m,
Slide 20: LGI: A growing book, stable profit
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER LGI: A growing book, stable profit FINANCIAL HIGHLIGHTS FY 2017 FY 2016 • Operating profit flat on prior year, with positive growth in premiums in both Net release from operations (£m) 275 271 UK and US resulting in a 5% increase to £2.5bn Operating profit
Slide 21: GI: Strong direct premium growth
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER GI: Strong direct premium growth FINANCIAL HIGHLIGHTS 2017 2016 • GWP growth of 13%, despite competitive market and maintaining price discipline Net release from operations (£m) 30 42 Operating profit (£m) 37 52 • 38% of total GI sales are now through the D
Slide 22: Savings: Sale announced in December 2017
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Savings: Sale announced in December 2017 FINANCIAL HIGHLIGHTS 2017 2016 • Sale of Savings division to Swiss Re Release from operations (£m) 107 104 for £650m announced in Dec 17 and anticipated to complete mid 2019 New business strain (£m) (5) (5) Net relea
Slide 23: Robust capital position
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Robust capital position CAPITAL POSITION Coverage Ratio 230% 254% 171% 189% • Solvency II surplus of £6.9bn, £14.6bn £15.3bn £13.6bn £14.6bn • Coverage ratio of 189% £18bn • Core tier 1 Own funds of £11.6bn (79%) £16bn • Solvency II Surplus after dividend i
Slide 24: Movement in the Solvency II surplus
Movement in the Solvency II surplus 8.0 £1.2bn Net Surplus Generation 7.5 0.4 (0.4) (0.1) 0.4 7.0 Solvency II Surplus (£bn) (0.9) 0.0 0.5 6.5 1.3 3 6.0 5.5 6.9 £1.3bn Operational Surplus 5.0 5.7 Generation 4.5 4.0 Surplus YE Surplus from Release of Risk TMTP New Business Operating External Market Su
Slide 25: Estimated Solvency II new business value metric
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Estimated Solvency II new business value metric Contribution 2017 PVNBP from New Margin % Business UK Annuity business LGR (£m) 4,083 346 8.5 UK Insurance Total (£m) 1,496 129 8.6 Retail Protection 1,293 111 8.6 Group Protection 203 18 8.7 LGI America (£m)
Slide 26: In summary: Excellent growth
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER In summary: Excellent growth Operating profit from continuing ops. Earnings per share excluding 2017 Mortality release excluding mortality release mortality release and US tax £1,616m, +12% 23.10p, +9% £126m Base YE16 21.22 YE16 1,447 £206m CMI 2015 YE 17 1
Slide 27: Group Strategy
Group Strategy Nigel Wilson, Group Chief Executive Investing & Annuities Investment Management Insurance LGR AUA LGIM AUM LGI & GI GWP £58.2bn £983bn £2.9bn +7% +10% +6% LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2018 27
Slide 28: Our six growth drivers: delivering inclusive capitalism
NIGEL WILSON: GROUP CHIEF EXECUTIVE Our six growth drivers: delivering inclusive capitalism Growth drivers Legal & General’s Actions Broader Economic Potential Ageing • Optimise longevity exposure for corporates demographics • Deploy housing equity for old-age needs, add specialist housing for right
Slide 29: A clear strategy redefined: delivering inclusive capitalism
NIGEL WILSON: GROUP CHIEF EXECUTIVE A clear strategy redefined: delivering inclusive capitalism Reshaping of the Group leading to three focused business areas: • Achieve global leadership in Pension LGRI de-risking • Use long-term capital to become the UK leader INVESTING & LGRR in Direct Investment
Slide 30: INVESTING & ANNUITIES: LGR - A unique business model
NIGEL WILSON: GROUP CHIEF EXECUTIVE INVESTING & ANNUITIES: LGR - A unique business model Differentiated capability to attract annuity mandates – significant Global growth potential Unique Group capability in sourcing Direct Investments and managing credit exposures ANNUITIES INVESTING £58.2bn £12.2b
Slide 31: INVESTING & ANNUITIES: LGC - A unique group capability
NIGEL WILSON: GROUP CHIEF EXECUTIVE INVESTING & ANNUITIES: LGC - A unique group capability Utilising Group capabilities to drive shareholder returns Delivering Group benefits in LGR and LGIM INVESTING £7.3bn £1.5bn Investment return £1.5bn and Direct 0.5 Urban Regeneration profit growth investments
Slide 32: INVESTMENT MANAGEMENT: A diversified business, growing globally
NIGEL WILSON: GROUP CHIEF EXECUTIVE INVESTMENT MANAGEMENT: A diversified business, growing globally Broadening investment capability Targeting international growth Growing Retail, Personal investing and Workplace Savings FY17 AUM: £983.3bn Growing globally Active Equities 7 Real assets 24 44 88 RoW
Slide 33: INSURANCE: Becoming a fully digitally and data-enabled insurer
NIGEL WILSON: GROUP CHIEF EXECUTIVE INSURANCE: Becoming a fully digitally and data-enabled insurer Optimise Operations: Utilising technology to execute and manage risk effectively Digitise and Diversify: Broaden via partnerships and implement digital customer proposition Innovate and Explore: Levera
Slide 34: Unique culture of collaboration
NIGEL WILSON: GROUP CHIEF EXECUTIVE Unique culture of collaboration Delivering for customers by co-operating across the business - LGIM DB clients moving to LGR de-risking solutions Institutional - LGC asset creation for LGIM and LGR - LGIM managing LGR assets - SalaryFinance across LGI, LGR and LGI
Slide 35: Expansion in the US
NIGEL WILSON: GROUP CHIEF EXECUTIVE Expansion in the US Legal & General Retirement America (LGRA) Location: Stamford, CT. Started in 2015 2016 2017 PRT premiums ($m) 448 713 No. of PRT deals 6 15 George Palms Aaron Meder Drew Love Significant progress in US PRT mandates in 2017 CEO, CEO, SVP & CFO,
Slide 36: LGIM Environmental, Social and Governance: The $100bn Future World Fund
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGIM Environmental, Social and Governance: The $100bn Future World Fund Launch: Feb 2017 Fund size: $6.3bn Aims: - to provide better risk-adjusted returns over the long term by using an alternatively-weighted index rather than a conventional market-capitalisation
Slide 37: Build to Rent Fund: £10bn opportunity
NIGEL WILSON: GROUP CHIEF EXECUTIVE Build to Rent Fund: £10bn opportunity Collaboration between LGC and LGIM launched £600m open-ended BTR fund. Now over £1bn investment capability and growing. Using long term capital to address the chronic long term lack of housing supply and meet the increasing de
Slide 38: LGC: Later Living
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGC: Later Living Significant • 65+ year old population forecast to grow by 50% by 2033 market • 3.3m Last Time Buyers (‘LTB’) looking to downsize with £820bn LTB opportunity housing wealth locked up in homes no longer fit for purpose • 1% of 60+ in UK live in ret
Slide 39: Digital: Disruption is a privilege and a responsibility
NIGEL WILSON: GROUP CHIEF EXECUTIVE Digital: Disruption is a privilege and a responsibility SmartQuote MyAccount SmartClaims • Reduced 30+ difficult questions • 633k customers registered on My • First service launched out of our to who you are, where you live Account, 39% more than in 2016, Beta Pro
Slide 40: Digital: Disruption is a privilege and a responsibility
NIGEL WILSON: GROUP CHIEF EXECUTIVE Digital: Disruption is a privilege and a responsibility Robotics Slice Labs SalaryFinance • 50 robots deployed to date • Technology partnership to offer • 250,000 people added to the across the whole of L&G on-demand homeshare platform since L&G investment insuran
Slide 41: Our financial ambition
NIGEL WILSON: GROUP CHIEF EXECUTIVE Our financial ambition Our Strategic goals to 2020: Between 2011 – 2015 we • Achieve global leadership in pensions de-risking and provide a suite of products achieved a 10% growth in EPS to maximise retirement income • Help people achieve security affordably Our a
Slide 42: Delivering inclusive capitalism
Delivering inclusive capitalism Sharing success with investors, customers and society LEGAL & GENERAL GROUP PLC | YEAR END RESULTS – MARCH 2018