Legal & General Group PLC · LSE:LGEN
Legal & General — Debt Investor Presentation (April 2020)
39 slides from Legal & General's debt investor presentation, April 2020
Slide 1: Proposed GBP 30.5NC10.5 Tier 2 Offering
Proposed GBP 30.5NC10.5 Tier 2 Offering Inclusive capitalism underpins our strategy April 2020
Slide 2: Executive Summary
Executive Summary • UK market leader in managing risk, being the UK’s leader in bulk annuities, life insurance and other retirement products for individuals and companies • One of Europe’s largest and most successful asset managers, with over £1.2 trillion of assets (FY 2019) Legal & • Diversified b
Slide 3: Our focused strategy continues to deliver profitable growth
Our focused strategy continues to deliver profitable growth Operating Profit (£m) Division Business CAGR % 2015 2016 2017 2018 2019 LGRI Pension Risk Transfer (PRT)1 516 651 716 832 1,116 21 LGIM Investment Management 355 366 400 407 423 4 LGC Capital Investment 233 257 272 322 363 12 LGI Insurance2
Slide 4: A collaborative business model creating value
A collaborative business model creating value Capital benefits Retirement Structuring (PRT & Solutions) Building client Technology expertise relationships Insurance leadership Providing seed capital Providing asset Manufacturing management SII-eligible Providing services assets capital Contributing
Slide 5: We are growing our PRT business and LGIM internationally
We are growing our PRT business and LGIM internationally International PRT Premiums (£m) International LGIM AUM (£bn) Volumes doubled in 3 years AUM doubled in 3 years Canada Japan Ireland Other Asia Gulf Europe US US • Record US PRT volumes, over $1bn • 28% CAGR in International AUM since 2016 • Wo
Slide 6: Financial highlights
Financial highlights An established track record of consistent growth
Slide 7: LGRI: PRT is highly cash generative and pays back in 5 years
LGRI: PRT is highly cash generative and pays back in 5 years Cumulative OSG 1 from £10bn of new UK PRT business (£m) • Payback on new PRT business is c.5 years • £10bn of UK PRT new business will generate: ‒ A c.4% strain in year 1 ‒ OSG of c.£100m in year 2 ‒ OSG of over £1bn over the expected life
Slide 8: LGR: diversified portfolio, high quality assets
LGR: diversified portfolio, high quality assets LGR Asset portfolio - £75.9bn LGR Bond Portfolio • 17% of bonds in Sovereign-like assets • Two-thirds A rated or better • 22% of LGR’s bond portfolio invested in UK-listed corporate credit (ex. Sovereigns) ‒ Of which 46% are in multi-nationals, e.g. GS
Slide 9: LGR: unique and high quality Direct Investment portfolio
LGR: unique and high quality Direct Investment portfolio LGR DI Portfolio* (2019) DI ESG Investments • Diversified and high quality DI portfolio of • £1.1bn of renewable and alternate £21.6bn: energy investments, predominantly in ─ 1% sub investment grade solar and offshore wind ─ >90% of portfolio
Slide 10: A well-supported dividend
A well-supported dividend Operating profit from divisions1 (£m) 2,525 2,231 1,702 1,902 2,034 • On the 3rd of April 2020, Legal & General 1,483 1,109 1,277 1,329 confirmed its current intention to pay a final 2019 dividend. • The Board of Legal & General plc gave 2011 2012 2013 2014 2015 2016 2017 2
Slide 11: Capital Position & Proposed Transaction
Capital Position & Proposed Transaction
Slide 12: Solvency II Balance sheet
Solvency II Balance sheet Solvency II Balance Sheet (£bn) YE 2019 Solvency position 171% 189% 188% 184% •Solvency II surplus of £7.3bn •Shareholder Solvency ratio of 184% •Core tier 1 Own funds of £12.4bn (77%) Legal & General’s solvency ratio remains robust and has moved broadly in line with publis
Slide 13: Movement in the surplus
Movement in the surplus Solvency II surplus analysis of change (£bn) 188% 184% 13 Solvency II coverage ratio is on shareholder basis
Slide 14: Group risk profile: Our economic exposure to rates is low
Group risk profile: Our economic exposure to rates is low Solvency Capital Exposures Mortality, 8% Other,18% Longevity, 22% Operational, 5% • Primary exposures are to Longevity & Credit (c.50%) • Economic exposure to interest rates is low (1%) Currency, 4% • Property exposure is just 9% Property, 9%
Slide 15: Solvency II sensitivity analysis
Solvency II sensitivity analysis Solvency II sensitivities 1: Impact on coverage ratio 2,3 2,3 4 5 5 6 6 7 7,8 9 Solvency II coverage ratio is on shareholder basis 1. The sensitivities exclude the impact from the Mature Savings business (including the With-Profits fund) as the risks have been transf
Slide 16: Debt instruments summary
Debt instruments summary Debt Redemption Profile (£m)1 Rating Type Entity / Instruments Moody’s S&P 800 Financial 700 L&G Assurance Strength Aa3 AA- Society Ltd 600 Rating 500 400 L&G Finance plc / A2 A Instrument Senior 300 Credit 200 Ratings L&G Group plc / A3 BBB+ 100 Tier 2 0 2 2 2020 2021 2022
Slide 17: Proposed transaction: Summary Terms & Conditions
Proposed transaction: Summary Terms & Conditions Issuer Legal & General Group Plc Instrument £[•]m Fixed Rate Reset Subordinated Notes due 2050 (the “Notes”) Amount £ benchmark Issuer Credit Ratings A2 / A / A+ (Moody’s / S&P / Fitch) Expected Issue Rating A3 / BBB+ (Moody’s / S&P) Maturity Date [•]
Slide 18: Structural comparison
Structural comparison Legal & General Group Plc Legal & General Group Plc Royal London M&G Prudential Issue Date Apr 2020 Nov 2019 Sep 2019 Jul 2019 Sep 2039 First Call Date Nov 2030 Nov 2029 Jul 2024 6m Par Call prior to Sep 2039 Maturity Nov 2050 Nov 2049 Sep 2049 Jul 2049 Issuer Rating (M/S/F) A2
Slide 19: Appendix
reas General Appendix
Slide 20: FY19 Financial highlights
FY19 Financial highlights £2,514m 28.66p 20.4% +17% +16% Operating profit from divisions1 Earnings per share2 Return on equity 2018: £2,152m 2018: 24.74p 2018: 22.7% 156p £1.6bn 17.57p +9% +9% +7% Book value per share SII operational surplus generation Full year dividend 2018: 143p 2018: £1.4bn 2018
Slide 21: Strong growth across the business
Strong growth across the business Division Business Product 2015 2016 2017 2018 2019 CAGR % LGRI Pension Risk Transfer (PRT) Global bulk annuity premiums (£m) 47 LGIM Investment Management External net flows (£bn) 23 LGC Capital Investment Direct investments AUM (£m) 35 LGI Insurance Gross written p
Slide 22: Legal & General operates across the full DB pension journey
Legal & General operates across the full DB pension journey Legal & General Retirement Longevity Index & multi- Active Investing in insurance or LDI Buy-in Buyout asset funds fixed Real Assets Assured Payment Policy Legal & General Investment Management Legal & General Capital A case study: Rolls Ro
Slide 23: Financial highlights: Consistent delivery in 2019
Financial highlights: Consistent delivery in 2019 Metric FY 2018 FY 2019 % Operating profit from continuing divisions (£m) 2,152 2,514 17 Discontinued operations (£m) 79 11 n/a Operating profit from divisions (£m) 2,231 2,525 13 Group debt costs (£m) (203) (208) (2) Group investment projects & expen
Slide 24: LGR: Consistently delivering, record £13bn new business
LGR: Consistently delivering, record £13bn new business Financial Highlights FY 2018 FY 2019 Operating profit excl. mortality release (£m) 1,115 1,414 • Operating profit excluding mortality releases of £1,414m up 27%, reflecting: - LGR Institutional 832 1,116 ‒ Strong performance from back book prud
Slide 25: LGRI: Record new business
LGRI: Record new business Total Sales (£m) FY 2018 FY 2019 • £11.4bn premium for global PRT transactions including: ‒ £4.6bn bulk annuity for the Rolls-Royce UK Pension Fund UK Pension Risk Transfer 8,351 10,325 ‒ £1.6bn bulk annuity with National Grid UK Pension International Pension Risk Transfer
Slide 26: LGRR: Increasing annuity volumes driving profit growth
LGRR: Increasing annuity volumes driving profit growth 26 Operating Profit excl. mortality release (£m) Individual Annuity Sales (£m) Individual annuity sales up 22% to £970m 24% CAGR •Higher sales benefiting from improved enhanced annuity proposition and increased intermediary presence •Introducer
Slide 27: LGR: Top direct investments by exposure
LGR: Top direct investments by exposure* Year of Investment Counterparty Sector Investment value (£m) 1 HMRC Buildings Government 2016 - 2019 1,201 2 Places For People Social Housing 2014 320 3 London Gateway Transportation 2016 306 4 Thames Tideway Utilities 2016 296 5 The Rolls Building, EC4, Secr
Slide 28: LGIM: Record external net flows of £86bn
LGIM: Record external net flows of £86bn Financial Highlights FY 2018 FY 2019 • Operating profit up 4% to £423m Asset management revenue1 (£m) 847 912 • Net flows of £86.4bn (9.4% of opening external AUM), of which £59.2bn International: Asset management expenses1 (£m) (443) (491) ‒ International fl
Slide 29: LGIM: An on-going commitment to profitable growth and investment
LGIM: An on-going commitment to profitable growth and investment LGIM Re-based Operating Profit (£m) • Going forward, LGIM-related project expenditure currently reflected in Group Investment projects, will be allocated to 423 the LGIM result: ‒ In 2019, this was equivalent to £29m of expenses. This
Slide 30: LGC: Delivering profits and generating assets for LGR
LGC: Delivering profits and generating assets for LGR Financial Highlights FY 2018 FY 2019 • LGC operating profit up 13% to £363m, driven by our diversified and growing Direct Investments portfolio Operating profit (£m) 322 363 • Direct Investments assets up 22% to £2.9bn: - Direct Investments 188 2
Slide 31: LGI: Stable margins in competitive markets
LGI: Stable margins in competitive markets Financial Highlights FY 2018 FY 2019 • Operating Profit up 2% to £314m, continuing to contribute stable profits to the Group: Operating profit (£m) 308 314 ‒ UK Operating Profit down 9% to £223m, due to a - UK 246 223 change in intra-group reinsurance of US
Slide 32: Large shares in existing markets, expanding into new ones
Large shares in existing markets, expanding into new ones Our strategy is aligned to our 6 structural growth drivers Growth Market Market Growth Market Market Market Opportunity Market Opportunity Drivers Share % Size Drivers Share % Size • UK PRT 25 £42bn1 • UK DC AUM 22 £438bn • US PRT 4 $30bn1 •
Slide 33: PRT: Large UK and US markets, with significant further potential
PRT: Large UK and US markets, with significant further potential UK PRT market (£bn) UK DB Liabilities (c£2.1tn) Ageing Demographics US PRT market ($bn) US DB Liabilities (c$3.5tn) 33 * L&G estimate
Slide 34: LGIM: Strong growth in AUM at scale by product, region and channel
LGIM: Strong growth in AUM at scale by product, region and channel AUM 15-19 AUM 15-19 AUM 15-19 By Product 2019 CAGR By Region 2019 CAGR By Channel 2019 CAGR Globalisation of asset £bn % £bn % £bn % markets Index1 404 11 UK 823 7 UK DB 679 7 Active 177 13 US 186 23 UK DC 94 20 Strategies LDI Soluti
Slide 35: LGC: Our alternative asset capabilities are growing
LGC: Our alternative asset capabilities are growing Access to Creation of Profit Type Rationale Sector Examples Ext’l Funding LGR Financed Investing in Maturity Partners Assets the Real Economy Alternative • Building Future Cities Asset businesses and •Urban Regeneration − Oxford, MediaCity Manager
Slide 36: A commitment to energy transition. Strong ESG credentials
A commitment to energy transition. Strong ESG credentials Identifying value creation and destruction from climate change Strong ESG credentials Addressing L&G is recognised as an ESG leader both Climate Power Heat Transport in terms of: Change 1.How our businesses operate LGIM VC Produce ‒ AA (leade
Slide 37: Delivering Inclusive Capitalism
Delivering Inclusive Capitalism Set out ambition to maintain Between 2011 – 2015 we Will set out future ambition 10% EPS CAGR to 2020 achieved +10% growth at a Capital Markets Event Achieved this in in EPS on 12th November 2020 4 years instead of 5 Achieve global leadership in pensions de-risking Pr
Slide 38: Important notice (1/2)
Important notice (1/2) • NOT FOR PUBLICATION, DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) • Manufacturer t
Slide 39: Important notice (2/2)
Important notice (2/2) • The presentation is not an offer of securities for sale in the United States. Neither this presentation nor any part or copy of it may otherwise be re-taken or re-transmitted into the United States or represented or redistributed, directly or indirectly, in the United States
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