Legal & General Group Plc · LSE:LGEN
Legal & General — H1 2017 Earnings Presentation
40 slides from Legal & General's earnings presentation, August 2017
Slide 1: Excellent execution delivering consistently improving financial performance
Excellent execution delivering consistently improving financial performance xo) j 2 3 & understanding 5 en oe satisfied} ha appy cppolie we professional aa © positive” straightforward 55 Service pick ihel ful 80% caring prompt p clear Ay = thank informatior 5 “Competitive ... and positively engaging
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: Operating profit, profit before tax, earnings per share
Operating profit1 Profit before tax1 Earnings per share1 £988m £1,163m 15.94p IFRS return on equity1 Net release from operations Interim dividend3 26.7% £724m 4.30p
Slide 4: For 180 years, L&G has prospered through manufacturing and distributing
For 180 years, L&G has prospered through manufacturing and distributing economically and socially useful products and services to our customers Our active manufacturing and management of long duration assets and liabilities sits at the heart of our business, creating competitive advantage, market le
Slide 5: Growth drivers and 2017 achievements
Growth drivers 2017 achievements Ageing • • demographics • • Globalisation of • • asset markets • • • • Creating real assets • • • • • Welfare reforms • • • Technological • • innovation • Today’s capital • •
Slide 6: Divisions: market position and share
Operating profit £m Divisions H1 2017 % Market position and share2 • • • • Asset • • Management • • • • • Insurance • • Savings •
Slide 7: Earnings per share (p)
Earnings per share (p) 21.2 18.2 16.7 15.2 13.8 12.4 H1 17 15.9 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Actual performance Average consensus
Slide 8: Operating profit, profit before tax, earnings per share
Operating profit Profit before tax Earnings per share £988m £1,163m 15.94p
Slide 9: Assets & premiums, cash & earnings, capital, dividend
H1 2017 H1 2016 % Assets & Premiums Cash & Earnings Capital Dividend
Slide 10: Operating profit from divisions (£m)
Operating profit from divisions (£m) 1% 5% LGR 1,902 13% 1,702 LGIM 1,483 LGC 1,277 1,329 13% 51% 1,120 LGI 942 General Insurance 17% Savings 2012 2013 2014 2015 2016 H1 2017 Divisions H1 2017 H1 2016 % Legal & General Retirement (LGR) 566 405 40 Legal & General Investment Management (LGIM) 194 171
Slide 11: Jeff Davies: Group Chief Financial Officer - Investment variance
JEFF DAVIES: GROUP CHIEF FINANCIAL OFFICER Investment variance eS Operating profit (£m) Investment variance (£m): LGR LGIM LGC LGl General Insurance Savings' Group Minority interest Profit before tax (£m) Profit after tax (£m) Earnings per share (pence) 169 952 15.94 11.27 ¢ LGC: Favourable returns
Slide 12: Capital position: Economic Capital and Solvency II
• CAPITAL POSITION Coverage 230% 247% 171% 186% • Ratio £14.6bn £15.4bn £13.6bn £14.5bn £18bn • £16bn £14bn £9.2bn £8.3bn £6.7bn £5.7bn £12bn • £10bn • £8bn £7.9bn £7.8bn £6bn £6.3bn £6.2bn £4bn £2bn • £0bn YE 2016 H1 2017 YE 2016 H1 2017 Economic Capital Solvency II
Slide 13: Solvency II surplus generation
Net Surplus Generation £0.5bn 7.0 • Expected releases increase surplus by £0.6bn. This includes a run-off of the TMTP of £(0.2)bn and release of Risk Margin of Surplus Emerging 6.6 £0.2bn 0.5 • Capital efficient annuity sales and a positive Solvency II Surplus (£bn) contribution from insurance new b
Slide 14: H1 2017 PVNBP and new business contribution
Contribution H1 2017 PVNBP from New Margin % Business 1,859 166 8.9 754 69 9.1 632 61 9.6 122 8 6.5 376 48 12.8 2,989 283 9.5 • • • •
Slide 15: Financial highlights H1 2017
FINANCIAL HIGHLIGHTS H1 2017 H1 2016 • • •
Slide 16: Financial highlights H1 2017
FINANCIAL HIGHLIGHTS H1 2017 H1 2016 • • • •
Slide 17: Financial highlights H1 2017: LGI US dividend
FINANCIAL HIGHLIGHTS H1 2017 H1 2016 • • • • LGI US dividend ($m) $100m • $91m $83m $76m $63m $69m •
Slide 18: Financial highlights H1 2017
FINANCIAL HIGHLIGHTS H1 2017 H1 2016 • • • • •
Slide 19: Financial highlights H1 2017
FINANCIAL HIGHLIGHTS H1 2017 H1 2016 • • • •
Slide 20: Operating profit, new business sales, AUA
Operating profit New business sales AUA £566m £3.2bn £55.6bn
Slide 21: Financial highlights H1 2017
• FINANCIAL HIGHLIGHTS H1 2017 H1 2016 • •
Slide 22: Longevity exposure as at June 2017
LONGEVITY EXPOSURE AS AT 30 JUNE 2017 MORTALITY IMPROVER BASIS £61.4bn £15.9bn* Year End Mortality Improvers 2010 CMI 2009 £45.5bn 2011 CMI 2009 2012 CMI 2011 2013 CMI 2012 2014 CMI 2013B 2015 CMI 2013B 2016 CMI 2014 Adjusted Gross exposure Reinsurance Net exposure * Excludes pass-through longevity
Slide 23: Increasing proportion of direct investments whilst maintaining credit quality
INCREASING PROPORTION OF DIRECT .. WHILST MAINTAINING OVERALL CREDIT QUALITY & INVESTMENTS HIGH SECTORAL DIVERSIFICATION • BB or below AAA • 13% BBB • 85% 15% 82% AA H1 2017 2% by Credit 3% Rating • A 2% 2% 1. Sovereigns, 23% 3% 2. Utilities, 16% 3% 3% 23% 3. Consumer services and goods, 15% 4% 4. I
Slide 24: 1.1m customers served
BOTH OUR RETAIL & INSTITUTIONAL BUSINESSES DIVERSE SOURCES OF PROFIT HAVE SHOWN STRONG GROWTH LGR Retail LGR Institutional UK INDIVIDUAL UK PENSION RISK ANNUITIES TRANSFER Institutional: Longevity, Institutional: 53,000 Deferred, UK LIFETIME US PENSION RISK 141,000 MORTGAGES TRANSFER Institutional:
Slide 25: Pension risk transfer and lifetime mortgage markets
UK Pension Risk £2trn DB Transfer £10- pensions, Private pension £13.2bn 14bn c.4% sector £12.3bn £10.4bn transferred Transferred to £7.5bn to insurers insurers 2013 2014 2015 2016 2017 Est. Source: PPF & Mercer/LCP reports US Pension Risk $18- 20bn Transfer $3trn DB Private pension pensions, sector
Slide 26: AUM, total net flows, operating profit
AUM Total net flows Operating profit £951bn £21.7bn £194m
Slide 27: Operating performance: financial highlights H1 2017
OPERATING PERFORMANCE • 450 60 £394m 400 350 55 • £292m 300 51% 50 250 48% £194m 200 45 • 150 100 40 50 • 0 35 H1 2013 H1 2014 H1 2015 H1 2016 H1 2017 Revenue Profit C:I • FINANCIAL HIGHLIGHTS H1 2017 H1 2016 • •
Slide 28: AUM by Solutions, Index, Real Assets
Solutions AUM (£bn) GFI AUM1 (£bn) Index AUM (£bn) Real Assets AUM2 (£bn) 6% 332 446 145 20% 15% 21 262 23% 83 217 9 H1 2013 H1 2017 H1 2013 H1 2017 H1 2013 H1 2017 H1 2013 H1 2017 • • • • • • • • • •
Slide 29: DC AUM and AUA growth, DC client growth, Retail AUM
DC AUM and AUA growth (£bn) DC client growth Retail AUM (£bn) DC AUM 12,234 63 27 57 24 46 20 41 17 18 34 25 2,343 21 2,462 11 15 968 8 2013 2014 2015 2016 H1 2017 2013 2014 2015 2016 H1 2017 2013 2014 2015 2016 H1 2017 DC Assets DC AUA DC Schemes DC Customers ('000) 2013 2014 2015 2016 H1 2017 • •
Slide 30: International AUM Growth and Net Flows
International AUM Growth (£bn) International Net Flows (£bn) £198bn 17.9 14.5 12.9 8.7 9.5 £52bn H1 2013 H1 2014 H1 2015 H1 2016 H1 2017 2013 2014 2015 2016 H1 2017 Other International US Other International Column1 • • • • • • •
Slide 31: US AUM Growth and Net Flows
US AUM Growth (£bn) US Net Flows (£bn) £126.5bn 9.4 8.6 6.0 6.3 5.0 £21.5bn H1 2013 H1 2014 H1 2015 H1 2016 H1 2017 2013 2014 2015 2016 H1 2017 • • • • • •
Slide 32: Earnings per share, return on equity, interim dividend
Earnings per share Return on Equity Interim dividend 15.94p 26.7% 4.30p
Slide 33: Financial highlights H1 2017
FINANCIAL HIGHLIGHTS H1 2017 H1 2016 • • • • • 1. 2016 benefitted from the reversal of £7m of accrued promote relating to CALA Homes
Slide 34: Attracting new institutional capital following LGC initial investment
• Invest • • Develop • • Sell • Attracting new institutional capital following LGC initial investment
Slide 35: LGC initial investment in Cardiff
LGC initial investment in Cardiff has delivered profitable investment opportunities for Sourcing new institutional LGR and has attracted new institutional capital managed by LGIM capital funding Phase 1 • • • • Phase 2 • Phase 3 • • • Phase 4 Phase 5 – 10 • •
Slide 36: Macro themes provide growth opportunity
Sector Macro themes provide growth opportunity Scaling up existing Developing new businesses businesses Housing • • • • • • • • • • • Infrastructure • • • • • • • • • SME Finance • • • • • • •
Slide 37: Robotics and Platforms
Focus area 2017 achievements 1. Robotics • • • • 2. Platforms • • • • •
Slide 38: Data & Artificial Intelligence; Infrastructure
Focus area 2017 achievements 3. Data & • Artificial • Intelligence • • • • • • • 4. Infra- structure
Slide 39: Nigel Wilson: Group Chief Executive
NIGEL WILSON: GROUP CHIEF EXECUTIVE Help people achieve financial security affordably through insurance and workplace pensions Achieve market leadership in digital provision of insurance and retail investments LEGAL & GENERAL GROUP PLC | HALF YEAR RESULTS | AUGUST 2017 39
Slide 40: Excellent execution delivering consistently improving financial performance
Excellent execution delivering consistently improving financial performance xo) j 2 3 & understanding 5 en oe satisfied} ha appy cppolie we professional aa © positive” straightforward 55 Service pick ihel ful 80% caring prompt p clear Ay = thank informatior 5 “Competitive ... and positively engaging
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