Legal & General Group Plc · LSE:LGEN
Legal & General — FY2020 Earnings Presentation
33 slides from Legal & General's earnings presentation, March 2021
Slide 1: 2020 Full year results
2020 Full year results Delivering value through Inclusive Capitalism Robust, resilient and relevant
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: Robust, resilient and relevant
Robust, resilient and relevant Nigel Wilson Chief Executive Officer
Slide 4: Financial highlights: We remain a robust, resilient and relevant business
Financial highlights We remain a robust, resilient and relevant business £2,422m 17.57p • Our balance sheet is robust: Estimated Solvency ratio of 192% as Operating profit from Full year dividend at 5th March 2021. Unutilised credit divisions1 default reserve of £3.5bn 2019: £2,485m 2019: 17.57p • O
Slide 5: Financial summary: A robust performance
Financial summary: A robust performance The COVID-19 impact on 2020 divisional operating profit was £201m Estimated £m 2019 2020 % Covid-19 impact LGRI (excluding mortality release) 1,116 1,229 10 85 LGRR (excluding mortality release) 298 325 9 LGIM 394 404 3 LGC 363 275 (24) (100)1 LGI 314 189 (40)
Slide 6: We continued to write good levels of new business
We continued to write good levels of new business Division Business Product 2015 2016 2017 2018 2019 2020 11,392 9,140 8,843 6,630 LGRI Pension Risk Transfer (PRT) Global bulk annuity premiums1 (£m) 2,417 3,948 2 86.4 43.5 42.6 LGIM Investment Management External net flows (£bn) 37.7 29.2 20.4 2,877
Slide 7: Resilient new business value
Resilient new business value Division Volume 2018 2019 2020 Value metric (£m) 2018 2019 2020 UK PRT (£m) 8,351 10,325 7,593 LGRI SII NBVA 684 857 876 US PRT (£m) 646 893 1,250 LGIM External net flows (£bn) 42.6 86.4 20.4 ANNR1 19 21 2 UK RP Annual Premium (£m) 175 174 175 SII NBVA 93 98 123 LGI UK G
Slide 8: Our six structural growth drivers remain highly relevant
Our six structural growth drivers remain highly relevant Market 2025E Market 2025E Growth Growth Market Opportunity Share of Market Market Opportunity Share of Market Drivers Drivers NB, % Size NB, % Size • UK PRT 25 £415bn • UK DC AUM 24 £725bn+ • US PRT 6 $140bn+ • UK ISA AUM 1 £810bn+ Ageing • UK
Slide 9: Inclusive Capitalism is at the heart of our strategy, and ESG core to our goals
Inclusive Capitalism is at the ESG Ambition Examples heart of our strategy, and ESG • Decarbonise our balance sheet assets to align with the core to our goals Paris objective • Provide capital for up to 5% of the UK clean energy By addressing climate change and social inequity E market by 2021 (enou
Slide 10: L&G is the most relevant and only waterfront player in UK retirement solutions
L&G is the most relevant and only waterfront player in UK retirement solutions Theses are all large attractive, growing markets UK retirement solutions universe (2018) Accumulation Decumulation DB Pensions £1,918bn PRT Global DB: DB LDI £175bn $24tn Pensions £1,024bn1 (42%) Workplace Individual Annu
Slide 11: The highly synergistic nature of our business model underpins our strong ROE
The highly synergistic nature of our business model underpins our strong ROE Capital Workplace benefits channel Retirement Structuring (PRT & Solutions) Building client Technology expertise relationships Insurance leadership Providing Manufacturing seed capital Providing asset SII-eligible Providing
Slide 12: We have an established track record of consistent growth
We have an established track record of consistent growth A pause year in 2020, impacted by COVID-19 Operating profit from divisions1 (£m) Earnings per share2 (p) 9% CAGR 2,496 2,456 5% CAGR 28.66 X 2,231 2,034 24.74 1,902 23.10 1,702 21.22 1,483 X 19.84 1,277 1,329 18.16 1,109 16.70 15.20 13.84 12.4
Slide 13: LGC is a unique and important source of value creation
LGC is a unique and important source of value creation Creating and scaling alternative assets to back LGR liabilities and to attract third party capital Access to Sector Third party capital1 £bn Alternative asset GP Equity LGR Asset Example Assets External NAV 2025 class position (%) Creation 2020
Slide 14: Pemberton has successfully grown and diversified AUM since launch
Pemberton has successfully grown and diversified AUM since launch Pemberton AUM (€bn) >€9bn >€8.3bn 10 9.3 AUM1 Invested2 Across 4 strategies Since inception 8 6.1 6 88 111 4.5 Companies Investors 4 Invested2 Worldwide 2.1 2 1.3 102 8 0 0.5 Professionals3 Locations 2015 2016 2017 2018 2019 2020 Firm
Slide 15: CALA has grown revenues and profits strongly since L&G acquired a stake in 2013
CALA has grown revenues and profits strongly since L&G acquired a stake in 2013. 2021 YTD sales are good, despite COVID CALA has provided the foundation for the development of L&G’s Revenues, £m diversified housing platform Covid-19 impact 1,120 • Mar 2013: L&G acquires 46.5% of CALA 1,027 • Jan 201
Slide 16: We have made a good start against our five year ambitions
We have made a good start against our five year ambitions Cumulative (£bn) 2020-2024 2020 • Over the period 2020-20244 our ambition is for: ‒ Cash and capital generation to significantly Cash generation1 8.0-9.0 1.5 exceed dividends Capital generation2 8.0-9.0 1.5 ‒ EPS to grow faster than dividends
Slide 17: Financial highlights: Resilient through uncertainty
Financial highlights Resilient through uncertainty Jeff Davies Chief Financial Officer
Slide 18: Financial highlights: A pause year
Financial highlights: A pause year Metric 2019 2020 % Operating profit from continuing divisions (£m) 2,485 2,422 (3) Discontinued operations (£m) 11 34 Operating profit from divisions (£m) 2,496 2,456 (2) Group debt costs (£m) (208) (233) Group investment projects & expenses (£m) (157) (155) COVID-
Slide 19: LGR: Consistently delivering despite challenging environment
LGR: Consistently delivering despite challenging environment Financial Highlights 2019 2020 • Operating profit of £1,554m up 10%, reflecting: Operating profit excl. mortality release (£m) 1,414 1,554 ‒ Release from operations grew 10% reflecting the - LGR Institutional 1,116 1,229 scale of the busin
Slide 20: LGRI: Active PRT market with attractive margins
LGRI: Active PRT market with attractive margins. Five year ambition of £40-50bn UK PRT remains Total Sales (£m) 2019 2020 • Despite COVID-19, 2020 was the second largest year on record, with c.£30bn of UK PRT, highlighting the UK PRT1 10,325 7,593 resilience and strong appetite in this market US PRT
Slide 21: LGR: Defensive Bond portfolio – no defaults and limited downgrades
LGR: Defensive Bond portfolio – no defaults and limited downgrades to sub-investment grade LGR Bond Portfolio: £80.4bn • Defensively positioned, high quality portfolio not 2019 £70.0bn 2020 £80.4bn materially impacted by COVID-19 • The traded credit portfolio (excluding gilts), which AAA, 9% AAA, 9%
Slide 22: LGR: Direct Investment portfolio – high quality and diversified
LGR: Direct Investment portfolio – high quality and diversified counterparty exposure, with 99.9% of scheduled cash-flows paid LGR Direct Investment portfolio: £24.7bn, 28% of total LGR assets • The portfolio has continued to Direct investments by type Direct investments by sector perform strongly.
Slide 23: LGIM: Resilient performance with AUM and profit growth
LGIM: Resilient performance with AUM and profit growth • Operating profit up 3% to £404m, reflecting increased Financial Highlights 2019 2020 revenues from flows and asset values, partially offset by Asset management revenue1 (£m) 912 956 LGIM’s continued investment in its growth strategy Asset mana
Slide 24: LGIM: Resilient AUM and positive flows underpinned by diverse asset exposure
LGIM: Resilient AUM and positive flows underpinned by diverse asset exposure AUM progression from FY19 • Positive external net flows of £20.4bn driven by: – Strong UK DC external net flows of £11.1bn with 82 scheme wins in 2020 (64 in 2019) 63 – Strong UK DB external net flows of £10.2bn, driven pri
Slide 25: LGC: H2 recovery & continue to build alternative asset platform
LGC: H2 recovery & continue to build alternative asset platform Financial Highlights 2019 2020 • Operating profit of £275m, primarily impacted by a pause in house building activities in H1 2020 Operating profit (£m) 363 275 • Housing sales made a strong recovery in H2 2020 and - Direct Investments 2
Slide 26: LGI: Supporting customers through unprecedented times
LGI: Supporting customers through unprecedented times Financial Highlights 2019 2020 • Operating Profit of £189m, largely impacted by adverse mortality experience arising as a result of COVID-19 Operating profit (£m) 314 189 ‒ UK Operating Profit of £205m. Adverse mortality - UK 223 205 experience i
Slide 27: Robust Solvency II Balance sheet
Robust Solvency II Balance sheet Solvency II Balance Sheet (£bn) Solvency II surplus analysis of change (£bn) 184% 177% 17.1 7.4 16.1 7.3 (1.0) Rates: -£0.8bn Own Funds 1.5 Spread dispersion: -£0.4bn Other: -£0.2bn Capital 9.7 Requirement 8.8 Surplus (1.4) 7.8 1.0 YE 2019 YE 2020 (0.1) 7.4 7.3 0.4 (
Slide 28: Financial highlights: We remain a robust, resilient and relevant business
Financial highlights We remain a robust, resilient and relevant business • Despite Covid-19 we have £2,422m 17.3% delivered a resilient performance, consistent Operating profit from Return on equity with our five year ambitions divisions1 • Our balance sheet has been 2019: £2,485m 2019: 20.4% robust
Slide 29: Robust, resilient and relevant
Robust, resilient and relevant Nigel Wilson Chief Executive Officer
Slide 30: Each of our businesses contribute to our 5 year growth ambition
Each of our businesses contribute to our 5 year growth ambition We expect Group earnings to be increasingly diversified and less capital intensive Business 5 Year Ambition • £40-50bn of UK PRT new business volumes (2015-2020: £35bn) LGRI • $10bn of international PRT new business volumes (2015-2020:
Slide 31: Scaling up businesses of the future with a focus on ESG and Climate change
Scaling up businesses of the future with a focus on ESG and Climate change 100% “GROWN UPS” LGRI LGRR LGC LGIM LGI 20% - 50% 100% “SCALE UPS” Scitech NTR Energy Cala ETF Pemberton Future Cities BTR DC / Retail Kao Data Kensa ADV LGIMA SalaryFinance Later Living LGRA “START UPS” 3% - 20% 100% Pod Poi
Slide 32: Delivering inclusive capitalism
Delivering inclusive capitalism • We delivered a robust and resilient set of results in 2020, and a dividend of 17.57p per share • We have a clear and compelling strategy and set of financial ambitions • We have an established track record of profitable growth • 2021 has started well, with good leve
Slide 33: 2020 Full year results
2020 Full year results Delivering value through Inclusive Capitalism Robust, resilient and relevant