Legal & General Group Plc · LSE:LGEN
Legal & General — FY2013 Earnings Presentation
37 slides from Legal & General's earnings presentation, Mar 5, 2014
Slide 1: Year End Results
YEAR END RESULTS A PRESENTATION FROM LEGAL & GENERAL 5 March 2014 IMPROVING PEOPLE’S LIVES
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 uncertai
Slide 3: Nigel Wilson, Group Chief Executive
3 NIGEL WILSON. GROUP CHIEF EXECUTIVE
Slide 4: Financial Highlights
4 FINANCIAL HIGHLIGHTS. 1. Net cash generation up 16% to £1,002m (2012: £865m) 2. Operational cash generation up 9% to £1,042m (2012: £958m) 3. Operating profit up 7% to £1,158m (2012: £1,087m) 4. Profit before tax up 10% to £1,134m (2012: £1,033m) 5. Profit after tax up 12% to £896m (2012: £798m) 6
Slide 5: Strategic & Financial Evolution
5 STRATEGIC & FINANCIAL EVOLUTION. 2009 AND ONGOING 2012 2013 AND BEYOND CASH: CERTAINTY AND CASH + ORGANIC GROWTH + CASH + ORGANIC GROWTH SUSTAINABILITY SELECTIVE ACQUISITONS • Identification of five key macro • Continue to accelerate growth in • Industrialised and automated drivers of growth flow
Slide 6: Clear Strategy, Outstanding Results. Driving Cash and Dividends
6 CLEAR STRATEGY, OUTSTANDING RESULTS. GROWTH DRIVERS GROUP RESPONSE PROGRESS 2013 ACHIEVEMENTS Annuity premiums up 78% to £4.1bn AGEING RETIREMENT Longevity transactions totalling £5bn of liabilities POPULATIONS SOLUTIONS Workplace assets up 45% to £8.7bn Cofunds assets of £64bn DIGITAL DIGITAL Enh
Slide 7: Reorganised into 5 Profit Centres to Accelerate Growth
7 WE HAVE REORGANISED OUR BUSINESS INTO 5 PROFIT CENTRES TO ACCELERATE GROWTH. INVESTMENT LEGAL & GENERAL PROTECTION AND LEGAL & GENERAL US PROTECTION MANAGEMENT RETIREMENT (LGR) SAVINGS (LGAS) CAPITAL (LGC) (LGA) (LGIM) KERRIGAN PROCTER, MD MARK ZINKULA, CEO JOHN POLLOCK, CEO PAUL STANWORTH, MD JIM
Slide 8: Mark Gregory, Group Chief Financial Officer
MARK GREGORY. GROUP CHIEF FINANCIAL OFFICER FINANCIAL RESULTS: STRONG DELIVERY
Slide 9: Strong Delivery on All Key Metrics
9 STRONG DELIVERY ON ALL KEY METRICS. £m 2013 2012 GROWTH LGIM external net flows (£bn) 9.3 5.3 75% GROWTH Annuity premiums (£bn) 4.1 2.3 78% Savings net inflows (£bn) 6.8 0.1 n/a Insurance gross premiums (£bn) 2.8 2.5 12% US Protection gross premiums ($bn) 1.0 0.9 11% Net cash generation (£m) 1,002
Slide 10: Driving Growth: Increasing Stock
10 DRIVING GROWTH: INCREASING STOCK. INSURANCE PREMIUMS LGIM AUM GROWTH £2.8bn GROWTH £450bn R CAG GR 8% CA 9% £354bn £2.1bn 2010 2011 2012 2013 2010 2011 2012 2013 ANNUITIES ASSETS UK SAVINGS ASSETS £109bn GROWTH £34.4bn GROWTH R CAG Cofunds R 11 % CAG 31 % £25.4bn £48bn 2010 2011 2012 2013 2010 20
Slide 11: Net Cash: Increasing Stock Drives Growth
11 NET CASH: INCREASING STOCK DRIVES GROWTH. OPERATING NET CASH CASH £1,042m AGR GROWTH £1,002m GROWTH 7% C A GR 10% C 2013 increases from all areas: £840m £760m • Retail Protection: Strong H2 volumes; extending market leading position. • GI: Excellent combined 2010 2011 2012 2013 2010 2011 2012 201
Slide 12: High Quality Cash Generation Supporting Dividends
12 HIGH QUALITY CASH GENERATION SUPPORTING DIVIDENDS. DIVIDEND TO DIVIDEND % £m NET CASH GROUP CASH PROTECTION AND SAVINGS (LGAS) 401 627 90% LEGAL & GENERAL RETIREMENT 293 (LGR) INVESTMENT MANAGEMENT (LGIM) 239 213 89% US PROTECTION (LGA) 44 44 100% LEGAL & GENERAL CAPITAL (LGC) 137 GROUP DEBT AND
Slide 13: Capital Being Deployed Whilst Maintaining Balance Sheet Strength
13 CAPITAL BEING DEPLOYED WHILST MAINTAINING BALANCE SHEET STRENGTH. • Comfortable with IGD coverage reducing but remaining within preferred 175% - 225% range, over the longer term. • Capital deployed on organic and non-organic growth opportunities in areas of strategic focus: +£1.0bn Net cash £(0.1
Slide 14: How We Use Capital and Cash
14 HOW WE USE CAPITAL AND CASH. New Business Strain £40m Operational Cash Existing business CASH Generation stock FLOW £1,042m Dividend £550m Net cash less dividends £452m Capital stock 2013 £bn M&A 1 January 4.1 Business Start Up Net cash 1.0 ORGANIC GROWTH CAPITAL Dividends (0.6) M&A (0.3) NB EB O
Slide 15: Full Year Dividend Up 22% to 9.30p
15 FULL YEAR DIVIDEND UP 22% TO 9.30p. NEW DIVIDEND GUIDANCE: Assuming we continue to anticipate a Solvency II surplus being no lower than Solvency I, we expect over the next two years to reduce our net cash coverage of dividend towards 1.5 times. We will provide dividend guidance for subsequent yea
Slide 16: Consistent Focus on Cash Generation
16 CONSISTENT FOCUS ON CASH GENERATION. 2014 2013 £m GUIDANCE OPERATIONAL CASH LGAS ex. General Insurance c.430 421 Legal & General Retirement c.290 260 Legal & General America c.45 44 SUB TOTAL c.765 725 Legal & General Investment Management 239 Legal & General Capital 137 LGAS General Insurance 53
Slide 17: L&G America: Growing Cash
17 L&G AMERICA: US PROTECTION GWP % $1,024m GROWING CASH. 11 CAGR $836m FINANCIAL HIGHLIGHTS 2013 2012 US $m Net cash generation 69 63 Operating profit 145 156 2011 2012 2013 APE 155 142 US PROTECTION DIVIDEND PROGRESSION $69m 9% GR CA Term assurance premiums 887 786 $58m Universal life premiums 137
Slide 18: L&G Capital: Improving Returns
18 DIRECT INVESTMENTS GROWTH L&G CAPITAL: £2.9bn IMPROVING RETURNS. 69 % AGR FINANCIAL HIGHLIGHTS £m 2013 2012 C Operating profit 179 163 £0.6bn Net cash generation 137 123 2010 2011 2012 2013 Group investment variance 29 (23) LGR LGC LGA 2013 ASSET PORTFOLIO £bn LGR LGC BALANCE TOTAL Bonds: 30.0 1.
Slide 19: L&G Retirement: Growth with Diversity
19 L&G RETIREMENT: GROWTH WITH DIVERSITY. FINANCIAL HIGHLIGHTS £m 2013 2012 BUSINESS MIX AND SCALE Operational cash generation 260 243 450 400 New business surplus 33 14 350 Net cash generation 293 257 300 APE (£m) 250 Operating profit 310 281 200 150 Individual single premiums 1,277 1,320 100 50 Bu
Slide 20: L&G Retirement: All Bases Covered
20 L&G RETIREMENT: ALL BASES COVERED. FOUR LEVERS LEGAL & GENERAL’S DISTINCTIVE PROPOSITION OF GROWTH • Active across whole market with digital capacity and UK INDIVIDUAL pricing ability ANNUITIES • 75% of our sales are external • Unique link to LGIM’s client base (c.20% of UK DB UK BULK OUR APPETIT
Slide 21: John Pollock, LGAS Chief Executive Officer
JOHN POLLOCK. LGAS CHIEF EXECUTIVE OFFICER PERFORMING FOR OUR CUSTOMERS
Slide 22: LGAS: Scale and Change Driving Efficiency
22 LGAS: SCALE AND CHANGE DRIVING EFFICIENCY. UK PROTECTION GWP UK market leader in protection and £1.3bn AG R savings platforms with over 6 million 4% C individual customers and over 8,000 £1.1bn corporate schemes. FINANCIAL HIGHLIGHTS £m 2013 2012 Operational cash generation 474 436 New business s
Slide 23: Aligned to Growth Drivers
23 ALIGNED TO GROWTH DRIVERS. RETIREMENT • Workplace Savings net inflows £1.5bn, total assets £8.7bn. SOLUTIONS • 0.9m customers now able to benefit from our 50bps charge cap. • Suffolk Life net inflows £0.9bn, total assets £6.6bn. • Protection business: net cash more than doubled over four years to
Slide 24: Integration: Embedding Customer Focus
24 INTEGRATION: EMBEDDING CUSTOMER FOCUS. PHASE 1 PHASE 2 PHASE 3 INTEGRATION OPERATIONAL SYNERGIES CUSTOMER FOCUS COMPLETE UNDERWAY UNDERWAY PROGRESS ON INTEGRATION • Annualised cost savings of £34m achieved with reduction of 400 FTE. • Additional Cofunds savings on track to deliver £11m by 2015. •
Slide 25: Cofunds: Growth Engine
25 COFUNDS: GROWTH ENGINE. FORECAST PLATFORM 2014 FOCUS GROWTH TO 2018 • Years of under-investment need addressing to improve 1,400 profitability. 1,200 • Cost effective delivery of regulatory change. 1,000 • Delivery of integration synergies. 800 • Efficient delivery of enhanced platform propositio
Slide 26: Insurance: Performing for Customers
26 INSURANCE: PERFORMING FOR CUSTOMERS. 100% 80% • Exceptional year for GI profit, benefiting from benign weather, improved pricing and claims 60% processes. • Settlement costs lower than ‘natural market SETTLEMENT 40% share’. OF STORM CLAIMS • 60% of storm claims settled within four weeks in 20% AG
Slide 27: Focus on Corporate Customers
27 FOCUS ON CORPORATE CUSTOMERS. WORKPLACE ASSETS GROWTH OPERATIONAL SCALE £8.7bn • Workplace Savings: Over 900,000 members (2012: 381,000). R AG 51 %C • Group Protection: 3,300 companies with 1.9 million members. £3.8bn • Workplace Savings: 50% reduction in unit costs over two years. 2011 2012 2013
Slide 28: LGAS Strategic Vision
28 LGAS STRATEGIC VISION. OPPORTUNITIES LGAS RESPONSE • DRIVE SCALE WORKPLACE SAVINGS • GEARED GROWTH AND PROFITABILITY LOSSES • GROUPWIDE SYNERGIES – LGIM, RETIREMENT COFUNDS CAPABILITY AT • INVESTMENT IN PLATFORM THE CORE OF RETAIL • EASE OF CUSTOMER INTERACTION SAVINGS • HIGH GROWTH, PROFIT ENGIN
Slide 29: Mark Zinkula, LGIM Chief Executive Officer
MARK ZINKULA. LGIM CHIEF EXECUTIVE OFFICER ACCELERATING INTERNATIONAL EXPANSION
Slide 30: Robust Business Model Delivering Success
30 ROBUST BUSINESS MODEL DELIVERING SUCCESS. FINANCIAL HIGHLIGHTS £m 2013 2012 DC ASSETS UNDER MANAGEMENT Total revenue 594 533 £31bn % Total costs (290) (261) R 16 CAG Operating profit 304 272 £17bn Net cash generation 239 219 Cost:income ratio (%) 49 49 2009 2010 2011 2012 2013 External gross infl
Slide 31: Delivering International Expansion
31 DELIVERING INTERNATIONAL EXPANSION. INTERNATIONAL AUM • US: Record net inflows of $7.8bn in 2013 as £59bn we approach critical mass in the region. We R 27% have a healthy pipeline of fixed income and CAG LDI mandates. • Gulf: Strong net inflows of £4bn in 2013. We £23bn now manage £17bn of assets
Slide 32: A Rapidly Growing U.S. Market for LGIM
32 A RAPIDLY GROWING U.S. MARKET FOR LGIM. • Consistent strong growth with net inflows LGIMA GROWTH – ASSETS of $7.8bn in 2013. • Managing assets on behalf of four of the 10 $54bn largest corporate pension schemes in the US. • Performance remains strong with all our $38bn composites outperforming th
Slide 33: Serving the Evolving Needs of the UK Market
33 SERVING THE EVOLVING NEEDS OF THE UK MARKET. DC AND RETAIL AUM £31bn DB AUM £268bn £205bn £19bn £17bn £14bn 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 LGIM Retail DC Passive Active and LDI • UK net outflows driven by the maturing DB market but clients’ desire to de-risk remains strong with
Slide 34: Harnessing the Power of the L&G Group
34 HARNESSING THE POWER OF THE L&G GROUP. • Retail investments’ integration into DELIVERING SYNERGIES GROUPWIDE LGIM is progressing well. We are Increased Leverage enhancing our proposition, allocation to investment PROTECTION AND LGIM products expertise aligning it with our institutional RETIREMENT
Slide 35: Nigel Wilson, Group Chief Executive
NIGEL WILSON. GROUP CHIEF EXECUTIVE
Slide 36: 2014 – Further Progress in All Areas
36 2014 – FURTHER PROGRESS IN ALL AREAS. 2013 2014 OPERATING OPERATING DIVISIONS 2014 KEY ACTIONS CASH CASH £m GUIDANCE £m • Increase net flows: 2012: £0.6bn, 2013: £2.1bn • Reduce unit costs. Improve risk adjusted yield LGR 260 290 • Continue to diversify sources of profit: international and enhanc
Slide 37: Improving People's Lives
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