Legal & General Group Plc · LSE:LGEN
Legal & General — H1 2014 Earnings Presentation
40 slides from Legal & General's earnings presentation, Aug 6, 2014
Slide 1: Half-Year Results
1 HALF-YEAR RESULTS. A PRESENTATION FROM LEGAL & GENERAL 6 August 2014 FIVE MACRO TRENDS, FIVE WINNING STRATEGIES. Leighton Morris, one of our customers from South Wales.
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. GROUP CHIEF EXECUTIVE Best online report FTSE 100: Legal & General Group Plc - Corporate & Financial Awards 2014. New web app for investors launches today: Investorapp.legalandgeneral.com
Slide 4: Results Summary: Financial Highlights
4 RESULTS SUMMARY: FINANCIAL HIGHLIGHTS. 1. Annuity assets up 20% to £38.5bn (H1 2013: £32.2bn), LGIM assets up 13% to £654bn (H1 2013: £579bn) and Savings assets up 17% to £118bn (H1 2013: £100bn) 2. Net cash up 13% to £567m (H1 2013: £500m); Operational cash up 8% to £578m (H1 2013: £537m) 3. Oper
Slide 5: Clear and Focused Strategy
5 CLEAR AND FOCUSED STRATEGY. GROWTH DRIVERS GROUP RESPONSE 2014 ACHIEVEMENTS TO DATE • Total LGR premiums up 147% to £3.5bn following AGEING RETIREMENT PROGRESS the largest ever UK bulk annuity transaction POPULATIONS SOLUTIONS • Workplace assets up 9% to £9.5bn DIGITAL DIGITAL • GI Direct: Market
Slide 6: Five Successful Profit Centres
6 FIVE SUCCESSFUL PROFIT CENTRES. INVESTMENT LEGAL & GENERAL PROTECTION AND LEGAL & GENERAL LEGAL & GENERAL MANAGEMENT RETIREMENT (LGR) SAVINGS (LGAS) CAPITAL (LGC) AMERICA (LGA) (LGIM) KERRIGAN PROCTER, MD MARK ZINKULA, CEO JOHN POLLOCK, CEO PAUL STANWORTH, MD JIMMY ATKINS, CEO The leading UK de- L
Slide 7: Slow Money Powerhouse
7 SLOW MONEY POWERHOUSE. Institutional investment can help reverse the consistent decline in UK investment 24 Student Accommodation over 22 £1bn, maturities to 50 years 20 Affordable Housing % of GDP £500m, maturities to 50 years 18 16 Hospitals, Care Homes 14 Over £210m, maturities to 32 years 12 T
Slide 8: 2014 - Progress Across All Divisions
8 2014 - PROGRESS ACROSS ALL DIVISIONS. 2014 OPERATIONAL DIVISIONS 2014 KEY ACTIONS PROGRESS TO DATE CASH GUIDANCE £m • Increase net flows: 2012: £0.6bn, 2013: £2.1bn • Improve risk adjusted yield • Net flows already at £2.5bn LGR 290 • Reduce unit costs • Risk adjusted yield improved through £3.7bn
Slide 9: Mark Gregory: Financial Results: Continued Momentum
MARK GREGORY. GROUP CHIEF FINANCIAL OFFICER FINANCIAL RESULTS: CONTINUED MOMENTUM. CALA Homes, Albert Dock, Edinburgh. As at 30 June 2014, CALA’s owned and contracted land bank sits at over 12,500 plots, which is the equivalent of 9 years’ worth of new homes supply for the Group.
Slide 10: Consistent Delivery: Strong Results
10 CONSISTENT DELIVERY: STRONG RESULTS. £m H1 2014 H1 2013 Growth Annuity Assets (£bn) 38.5 32.2 20% LGIM Assets (£bn) 654 579 13% GROWTH LGAS Savings Assets (£bn) 118 100 17% UK Protection and GI gross premiums (£m) 921 875 5% LGA gross premiums ($m) 553 503 10% Operational cash generation (£m) 578
Slide 11: Driving Growth: Increasing Stock
11 DRIVING GROWTH: INCREASING STOCK. LGIM ASSETS GROWTH INSURANCE PREMIUMS GROWTH £654bn £2.8bn £2.1bn £482bn +9% £1.5bn 2011 2012 2013 H1 2014 2011 2012 2013 H1 2014 L&G RETIREMENT ASSETS GROWTH SAVINGS ASSETS GROWTH £38.5bn £118bn Cofunds £28.4bn £50bn 2011 2012 2013 H1 2014 2011 2012 2013 H1 2014
Slide 12: Increasing Stock: Rising Returns
12 INCREASING STOCK: RISING RETURNS. OPERATIONAL CASH GROWTH NET CASH GROWTH £1,042m £1,002m £940m £846m +8% +13% £578m £567m OPERATING PROFIT GROWTH RETURN ON EQUITY GROWTH 17.6% £1,158m £1,053m +11% £636m 14.9%
Slide 13: Net Cash: Growth in All Divisions
13 NET CASH: GROWTH IN ALL DIVISIONS. Increase in stock driving cash growth: £570m • LGR: 20% asset growth, £550m 13% net cash growth £530m • LGIM: 13% asset growth, 5% net cash growth £510m • LGAS: Saving assets up £490m 17%, UK Protection premiums up 7%, overall increase in net cash of £470m 16% £
Slide 14: L&G Capital: Improving Returns
14 L&G CAPITAL: IMPROVING RETURNS. DIRECT INVESTMENTS GROWTH £4.6bn FINANCIAL HIGHLIGHTS £m H1 2014 H1 2013 LGAS £2.9bn LGA Operating profit 102 86 LGC Net cash generation 82 68 LGR Group investment variance 26 42 £0.6bn 2011 2012 2013 H1 2014 H1 2014 PRINCIPAL BALANCE SHEET £bn LGR LGC BALANCE TOTA
Slide 15: L&G America: Growing Cash
15 L&G AMERICA: GROWING CASH. L&G AMERICA GROSS PREMIUMS $1,024m H1 H1 $836m FINANCIAL HIGHLIGHTS $m 2014 2013 +10% $553m Net cash generation 73 66 Operating profit 72 81 EEV operating profit 120 84 10.8% 2011 2012 2013 H1 2014 New business margin 10.0% L&G AMERICA DIVIDEND $73m APE 78 70 $58m Gross
Slide 16: Capital Position: Strong IGD
16 CAPITAL POSITION: STRONG IGD. • IGD coverage of 236% above our preferred 175% - 225% longer term range but includes £0.6bn impact of new subordinated debt raised. • Capital continues to be deployed, returns are being generated and balance sheet strength maintained. 0.1 0.1 0.3 0.2 0.6 0.2 0.6 4.7
Slide 17: Capital Position: Economic Capital
17 CAPITAL POSITION: ECONOMIC CAPITAL. 14 261% coverage 12 251% coverage 10 £6.9bn £7.6bn 8 £bn EC Surplus 6 EC Requirement 4 £4.5bn £4.7bn 2 0 YE 13 HY 14 Economic capital (EC) is the amount of capital (in addition to liabilities) we believe we need to hold to meet our objectives, ignoring any regu
Slide 18: Capital Position: Economic Capital Risk Profile
18 CAPITAL POSITION: ECONOMIC CAPITAL RISK PROFILE. 1% Credit Equity 8% 16% Market 12% Property Risk 69% 26% Market Insurance Other Market/ Risk Risk 7% Interest Rate Longevity 5% Lapse 44% 2% Insurance 5% Risk Mortality & Catastrophe 5% Non-life Operational Underwriting and Other Risk Operational a
Slide 19: Interim Dividend Up 21% to 2.90p
19 INTERIM DIVIDEND UP 21% TO 2.90p. 9.30p Final 7.65p Interim 6.40p 6.90p 4.75p 5.69p 3.84p 4.74p +21% 3.42p 2.73p 2.40p 2.90p 1.66p 1.96p 1.11p 1.33p 2009 2010 2011 2012 2013 H1 2014
Slide 20: Kerrigan Procter: Delivering Innovative Retirement Solutions
KERRIGAN PROCTER. LEGAL & GENERAL RETIREMENT MANAGING DIRECTOR DELIVERING INNOVATIVE RETIREMENT SOLUTIONS. In 2014, our £3 billion deal with the ICI pension scheme was the UK’s largest ever bulk annuity deal.
Slide 21: L&G Retirement: Innovating & Diversifying to Deliver Growth
21 L&G RETIREMENT: INNOVATING & DIVERSIFYING TO DELIVER GROWTH. WHERE WE ARE WHERE WE WANT TO BE FINANCIAL FINANCIAL HIGHLIGHTS£m HIGHLIGHTS £m H12014 H1 2014 H12013 H1 2013 Retirement Choices Operational cash generation 146 130 New business surplus 20 17 Leverage our established Retirement pricing,
Slide 22: LGR and LGIM De-risking Capability
22 LGR AND LGIM DE-RISKING CAPABILITY. Legal & General in US Legal & General Retirement LDI & Active Longevity Passive multi-asset Buy-in Buy-out funds Fixed insurance Legal & General Investment Management Index funds Solutions1 Active fixed Longevity Buy-in Buy-out interest insurance Assets 268.7 2
Slide 23: L&G Retirement: Ideally Placed to Provide Retirement Choices
23 L&G RETIREMENT: IDEALLY PLACED TO PROVIDE RETIREMENT CHOICES. Customer Viability of products needs: being assessed: In retirement asset / income management Simple income Manage drawdown income / growth Income and lifetime guarantees Access to other sources of wealth Lifetime mortgages Secure inco
Slide 24: Mark Zinkula: Accelerating International Expansion
MARK ZINKULA. LGIM CHIEF EXECUTIVE OFFICER ACCELERATING INTERNATIONAL EXPANSION. At 30 June 2014, we had £654 billion in assets.
Slide 25: LGIM: Continued Strong Business Performance
25 LGIM: CONTINUED STRONG BUSINESS PERFORMANCE. FINANCIAL HIGHLIGHTS £m H1 2014 H1 2013 • Operating profit growth of 5% Total revenue 309 292 Total costs 150 140 • Cost:income ratio continues to be maintained below 50% Operating profit 159 152 Net cash generation 125 119 • Persistency in line with l
Slide 26: LGIM: New Business Flows Show Increasing Diversification
26 LGIM: NEW BUSINESS FLOWS SHOW INCREASING DIVERSIFICATION. INDEX vs. NON-INDEX ASSETS1 £371bn £269bn £208bn £168bn • Non-Index funds account for 57% of total assets today compared to 45% in 2009 • Pension fund de-risking is driving growth across our Solutions and Active Fixed Income capabilities w
Slide 27: LGIM: Evolution of the UK Market
27 LGIM: EVOLUTION OF THE UK MARKET. UK DB vs. DC ASSETS1 SOLUTIONS ASSETS1 £469bn £253bn £280bn £33bn £91bn £17bn 2009 2010 2011 2012 2013 H1 2014 Solutions AUM Overlay assets • Providing thought leadership on ‘end to end’ investment strategies to the UK DB and DC markets • Offering a broader range
Slide 28: LGIM: Excellent Performance from Our Property Team
28 LGIM: EXCELLENT PERFORMANCE FROM OUR PROPERTY TEAM. PROPERTY AUM • Significant transactional activity in the first half of 2014 with £1.8bn invested £12.8bn • Strong flows from UK pension and retail £6.7bn clients and growing interest from the Gulf and Europe 2009 2010 2011 2012 2013 H1 2014 • Cu
Slide 29: LGIM: Continued International Development
29 LGIM: CONTINUED INTERNATIONAL DEVELOPMENT. INTERNATIONAL ASSETS • Strong growth in the US continues with net flows of £4.7bn in H1 2014 £83bn • Integration of GIA following the acquisition in May £23bn • Developing plans to enter the US Index 2009 2010 2011 2012 2013 H1 2014 market US Non US GIA
Slide 30: John Pollock: Performing for Our Customers
JOHN POLLOCK. LGAS CHIEF EXECUTIVE OFFICER PERFORMING FOR OUR CUSTOMERS. Our 2014 report shows the need for protection, with the average household having a ‘Deadline to the Breadline’ of just 26 days.
Slide 31: LGAS: Scale and Efficiency Driving Profits
31 LGAS: SCALE AND EFFICIENCY DRIVING PROFITS. UK PROTECTION GWP UK market leader in protection and savings platforms with over 6 million individual customers and over 8,000 corporate schemes. +7% FINANCIAL HIGHLIGHTS £m H1 2014 H1 2013 Operational cash generation 237 231 New business strain (31) (5
Slide 32: Protection: Consistently Market Leading
32 PROTECTION: CONSISTENTLY MARKET LEADING. NET CASH (UK PROTECTION) UK PROTECTION • Strong relationships with intermediaries • Retail Protection increasing Direct Channel sales (H1 2014 :16% of new business) +15% • Retail Protection widening distribution channels through NAG and TSB • Group Protect
Slide 33: General Insurance: Turnaround Delivering
33 GENERAL INSURANCE: TURNAROUND DELIVERING. GI OPERATING PROFIT / GWP TURNAROUND MANAGEMENT • Focus on risk selection • Step change in processing efficiency • Improvements for customers in claims model and indemnity spend • Leverage synergy in mortgage network • Highly experienced management team G
Slide 34: Corporate: Focus on Revenue Growth
34 CORPORATE: FOCUS ON REVENUE GROWTH. WORKPLACE ASSETS GROWTH £9.5bn £8.7bn DELIVERING SCALE • Workplace Savings: 1.1m members (2013: £3.8bn 903,000) • Group Protection: 3,100 companies with 1.9 million members 2011 2012 2013 H1 2014 • Workplace Savings: 50% reduction in unit WORKPLACE NET FLOWS co
Slide 35: Retail Savings: Leveraging Market Leading Platform
35 RETAIL SAVINGS: LEVERAGING MARKET LEADING PLATFORM. RETAIL SAVINGS AUA COFUNDS • Streamlined administration and efficient service • Delivered annualised cost saving of £6m to date and continue to target £11m per annum by the end of 2015 • Continue investing to strengthen lead Note: Includes Cofun
Slide 36: LGAS Strategic Vision
36 LGAS STRATEGIC VISION. OPPORTUNITIES LGAS RESPONSE H1 2014 UPDATE • DRIVE SCALE • OPERATING LOSS £(9)m • GEARED GROWTH AND • AUA £9.5bn WORKPLACE SAVINGS LOSSES PROFITABILITY • 93% OF AUA MANAGED • GROUPWIDE SYNERGIES – BY LGIM LGIM, LGR • INVESTMENT IN PLATFORM • MARKET LEADING COFUNDS CAPABILIT
Slide 37: Nigel Wilson, Group Chief Executive
NIGEL WILSON. GROUP CHIEF EXECUTIVE Vimto Gardens, Chapel Street, Salford. Part of Salford Central Regeneration Scheme which when complete will have created 11,000 new jobs, 220,000 square metres of commercial space, 849 new homes and 390 new hotel rooms.
Slide 38: L&G: Financially Successful, Socially and Economically Useful
38 L&G: FINANCIALLY SUCCESSFUL, SOCIALLY AND ECONOMICALLY USEFUL, WITH A STRONG FUTURE. • LGR: Opportunities for growth have increased • LGAS: Substantial digital progress coupled with improving internal cost efficiency • LGIM: Transformation to international fund manager accelerating • LGC: Success
Slide 39: Every Day Matters
39 EVERY DAY MATTERS. We have a powerful purpose. Every day, we promise to make financial security easier to achieve for our customers. We help people build better and more secure lives. In this way we demonstrate that we are economically and socially useful. We know our customers benefit from our d
Slide 40: Half-Year Results
40 HALF-YEAR RESULTS. A PRESENTATION FROM LEGAL & GENERAL 6 August 2014 FIVE MACRO TRENDS, FIVE WINNING STRATEGIES. Leighton Morris, one of our customers from South Wales.
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