Legal & General Group PLC · LSE:LGEN
Legal & General — H1 2021 Earnings Presentation
42 slides from Legal & General's earnings presentation, August 2021
Slide 1: Sustainable, ambitious, inclusive: 2021 Half year results
Sustainable, ambitious, inclusive 2021 Half year results £1,271m 22.0% Operating profit from divisions Return on equity H1 2020: £1,128m, +13% H1 2020: 6.3% H1 2019: £1,154m, +10% H1 2019: 20.2% 17.78p 5.18p Earnings per share Interim dividend H1 2020: 4.89p, +264% H1 2020: 4.93p, +5% H1 2019: 14.74
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: Sustainable, ambitious, inclusive
Sustainable, ambitious, inclusive Nigel Wilson Chief Executive Officer
Slide 4: Strong financial performance, well above pre-COVID levels
Strong financial performance, well above pre-COVID levels Strong Supported by a strong Driving strong profitability… balance sheet… shareholder returns £1,271m 183% 22.0% Operating profit from divisions1 Solvency II coverage ratio Return on equity H1 2020: £1,128m, +13% H1 2020: 173% H1 2020: 6.3% H
Slide 5: Our portfolio of divisions is delivering growth in operating profits
Our portfolio of divisions is delivering growth in operating profits LGC, LGI and LGRR delivering at least double-digit growth £m H1 2020 H1 2021 % LGC 123 250 103 LGI 88 134 52 LGRR 135 158 17 LGIM 197 204 4 LGRI 585 525 (10) Operating profit from continuing divisions 1,128 1,271 13 5
Slide 6: What differentiates L&G from peers?
What differentiates L&G from peers? Unique ability to create and manage assets to deliver retirement solutions Only global provider of end to end de-risking solutions Leading global retirement solutions World class asset manager provider Established alternative asset origination capability Collabora
Slide 7: Predictable and consistent strong performance over a decade
Predictable and consistent strong performance over a decade Operating profit from divisions1 (£m) Earnings per share1 (p) 9% CAGR 1,271 11% CAGR X 17.78 X 518 6.13 H1 2011 H1 2021 H1 2011 H1 2021 Dividend per share (p) Book Value per share (p) 164 12% CAGR 5.18 7% CAGR 1.66 83 H1 2011 H1 2021 H1 201
Slide 8: L&G develops long-term client and customer relationships
L&G develops long-term client and customer relationships Accumulation Phase Decumulation Phase Duration Duration • We are leaders in LDI1 and PRT (years) (years) across the UK and US • Index • We are the only business in the UK • Pension Risk DB • LDI1 12-18 30-40 and US that has both an LDI and a T
Slide 9: Clear purpose and long-term commitment to Inclusive Capitalism and ESG
We have a clear purpose, and a long-term commitment to Inclusive Capitalism and ESG, with a focus on execution To improve the lives of our customers, build a better society for the long term and create Our purpose value for our shareholders. We use our long-term assets in an economically effective a
Slide 10: Business aligned to six long-term macro growth drivers
Our business is closely aligned to six long-term, macro growth drivers Market Primary Growth drivers Strategic priorities opportunity divisions Ageing Be global leaders in pensions de-risking and retirement income solutions, LGRI, LGRR, $53tn demographics building upon success in the UK and US. LGIM
Slide 11: We have a number of attractive growth opportunities
We have a number of attractive growth opportunities Global PRT DC Pensions LGC Alternative AUM High growth, low penetration High growth, medium penetration High growth, low penetration • Global DB market c$25tn • Global DC market c$28tn • Increase LGC capacity in climate, • LGR UK annuity portfolio
Slide 12: Synergistic business model underpins our strong ROE
The highly synergistic nature of our business model underpins our strong ROE Tech synergy Workplace channel Capital benefits Retirement Structuring (LGRI & LGRR) Building client Technology expertise relationships Insurance leadership Providing Manufacturing seed capital Providing asset SII-eligible
Slide 13: LGC is successfully growing its Alternative Asset portfolio
LGC is successfully growing its Alternative Asset portfolio Alternative AUM (£bn) LGC Operating profit (£m) 40% of total LGC Alternative asset portfolio 363 assets: £8.7bn Traded & Treasury portfolio 322 272 146 275 257 250 134 55 148 163 136 18% of total LGC 3.4 3.1 assets: £6.2bn 2.9 2.4 217 188 1
Slide 14: LGC is the Group's asset origination engine
LGC is the Group’s asset origination engine, creating assets for LGR and attracting third party capital Committed capital / Sources of capital Example projects, partnerships and platforms identified projects* Sheffield Oxford Affordable housing LGR £10bn Cardiff Sky studios Build to rent External fu
Slide 15: LGC's asset creation platforms are a source of future growth
LGC’s asset creation platforms are a source of significant future growth and incremental value to the Group LGC LGC ownership % < 20% 20 – 50% c.50% c.100% Scitech Pemberton CALA Upwards growth trajectory BTR “SCALE UPS” n/a NTR Energy ADV Kao Data Kensa Later Living Oxford PV Tradeteq Onto Affordab
Slide 16: LGC is Building Back better and Levelling Up
LGC is “Building Back better” and “Levelling Up” Creating real assets that deliver a positive social and environmental impact Transforming the built environment Helping our ageing population live better and longer c.£1bn invested in 16 UK towns and cities, with Through Inspired Villages, we are savi
Slide 17: Case Study: Manchester, c.£3bn capital committed
Case Study: Manchester, c.£3bn capital committed We’ve been investing in Manchester for more than a decade. We’ve just announced a new £1.5bn innovation district in the city centre, in partnership with the University of Manchester 2016 2018 Launched Gifford Lea in Launched Bruntwood SciTech to Chesh
Slide 18: Case study: Pod Point
Case study: Pod Point Our investment in Pod Point is helping to scale the infrastructure for Electric Vehicle charging in the UK Supporting UK net zero transition Pod Point growth since investment • L&G took a c13% stake in Pod Point in Feb 2019 to access and help scale the electric vehicle (EV) cha
Slide 19: Case study: Inspired Villages
Case study: Inspired Villages Our new JV with NatWest Group Pension Fund will enable us to rapidly scale our Later Living proposition Supporting the UK’s ageing population Inspired Villages growth since investment • L&G established Inspired Villages in Aug 2017 to meet the growing demand for age-app
Slide 20: Case study: CALA
Case study: CALA We have grown Turnover and PBT by more than five times since we first invested in CALA in 2013 Supporting UK housing delivery CALA’s growth since investment • L&G acquired a 46.5% stake in CALA in March 2013. L&G acquired 100% of CALA in March 2018 • CALA has performed exceptionally
Slide 21: Financial highlights: Positioned for growth
Financial highlights Positioned for growth Jeff Davies Chief Financial Officer
Slide 22: Strong financial performance
Strong financial performance Metric H1 2019 H1 2020 H1 2021 2019 % 2020 % Operating profit from continuing divisions (£m) 1,154 1,128 1,271 10 13 Discontinued operations (£m) 26 - Operating profit from divisions (£m) 1,154 1,271 10 Group debt costs (£m) (115) (120) (4) Group investment projects & ex
Slide 23: LGR: Consistently delivering strong profits
LGR: Consistently delivering strong profits Financial Highlights H1 2020 H1 2021 • Operating profit of £683m, reflecting: Operating profit (£m) 720 683 ‒ Release from operations up 6%, reflecting the scale of the business as prudential margins unwind from the - LGR Institutional 585 525 growing back
Slide 24: LGRI: Successful execution in a slower market
LGRI: Successful execution in a slower market Total Sales (£m) H1 2020 H1 2021 • Robust volumes at good margins despite slower start to 2021. Good UK pipeline for H2, with £2.0bn won or in exclusive UK PRT1 3,176 2,965 negotiations. Total market size of £20-£25bn expected in 2021 US PRT 248 107 • £3
Slide 25: LGR assets: Defensive bond portfolio and direct investments
LGR assets: Defensive bond portfolio complemented by high quality, diversified direct investments LGR Bond Portfolio: £78.2bn LGR DI portfolio: £25.8bn, 30% of total LGR assets H1 2021 £78.2bn • Defensively positioned, high quality Direct investments portfolio. £3.4bn IFRS credit default by type AAA
Slide 26: LGIM: Profit growth from continued International expansion
LGIM: Profit growth from continued International expansion Financial Highlights H1 2020 H1 2021 • Operating profit up 4% to £204m, reflecting increased revenues from flows and robust cost management, leading Asset management revenue1 (£m) 467 480 to a stable cost:income ratio of 58% Asset management
Slide 27: LGIM: Strong net flows, with growth in higher margin products
LGIM: Strong net flows, with growth in higher margin products H1 2021 AUM progression and composition • Growth in higher margin areas including thematic ETFs, factor-based index, SIAF and multi-asset • Positive external net flows of £27.4bn driven by: FY 2020 1,279 Equities 37% – International flows
Slide 28: LGC: Strong H1 performance reflecting rebound
LGC: Strong H1 performance reflecting rebound to pre-pandemic growth targets Financial Highlights H1 2020 H1 2021 • Operating profit doubled to £250m, principally reflecting increased profits from our alternative asset portfolio Operating profit (£m) 123 250 – Alternative asset profits of £195m were
Slide 29: LGI: Supporting customers through unprecedented times
LGI: Supporting customers through unprecedented times Financial Highlights H1 2020 H1 2021 • Operating Profit of £134m, up 52%, with H1 2020 largely impacted by adverse mortality experience Operating profit (£m) 88 134 arising as a result of COVID-19, in addition to strong - UK 57 96 new business su
Slide 30: Robust Solvency II Balance sheet
Robust Solvency II Balance sheet Solvency II Balance Sheet (£bn) Solvency II surplus analysis of change (£bn) 177% 183% 17.1 7.4 16.6 7.5 - (0.2) Own Funds 0.8 (0.8) 0.6 (0.3) Capital 9.7 9.1 Requirement Surplus Rates: £0.5bn Other: £0.1bn 7.4 7.4 7.5 YE 2020 H1 2021 • Coverage ratio of 183% • Solve
Slide 31: Strongly positioned for growth, leverage to naturally reduce over time
Strongly positioned for growth, leverage to naturally reduce over time 10,000 Shareholder Equity 9,367 9,502 9,852 AA- Aa3 AA- 7,843 8,580 180 Fitch Moody’s S&P 8,000 160 6,000 164 156 158 4,000 143 140 • Between 2017-2019 leverage reduced due to equity growth 2,000 131 120 despite debt issuances ov
Slide 32: Good progress against five year cash, capital and dividend ambitions
We are making good progress against our five year cash, capital and dividend ambitions Cumulative (£bn) 2020-2024 To Date • Over the period 2020-20244 our ambition is for: ‒ Cash & capital generation significantly to exceed dividends Cash generation1 8.0-9.0 2.4 ‒ EPS to grow faster than dividends ‒
Slide 33: In summary
In summary £1,271m 22.0% • We have delivered a strong set of results, and are confident in achieving our five Operating profit from Return on equity year ambitions divisions1 H1 2020: £1,128m, +13% H1 2020: 6.3% • Our balance sheet remains H1 2019: £1,154m, +10% H1 2019: 20.2% robust, with SII cover
Slide 34: Sustainable, ambitious, inclusive
Sustainable, ambitious, inclusive Nigel Wilson Chief Executive Officer
Slide 35: Performance relative to Blackrock not reflected in valuation
Whilst we have performed well relative to Blackrock (a respected competitor) our performance has not been reflected in valuation EPS1 BVPS1 P/E 350 250 25.0 22.1x $36.99 £1.79 300 200 20.0 250 15.3x 200 31.9p 150 15.0 86p 150 $12.56 100 $242 10.0 100 $181 8.3x 8.0x 12.42p 50 5.0 50 0 0 0.0 2011 2012
Slide 36: A compelling investment case
A compelling investment case An established track record of consistent and profitable growth: between HY11-HY21 we 1 delivered 11% CAGR in EPS, 12% CAGR in DPS and 7% CAGR in Book Value per Share A highly synergistic and growth-oriented business model, driving c20% ROE, and strongly 2 aligned to six
Slide 37: Sustainable, ambitious, inclusive: 2021 Half year results
Sustainable, ambitious, inclusive 2021 Half year results £1,271m 22.0% Operating profit from divisions Return on equity H1 2020: £1,128m, +13% H1 2020: 6.3% H1 2019: £1,154m, +10% H1 2019: 20.2% 17.78p 5.18p Earnings per share Interim dividend H1 2020: 4.89p, +264% H1 2020: 4.93p, +5% H1 2019: 14.74
Slide 38: ESG at L&G: Ratings and collaborations
ESG at L&G: Ratings and collaborations The following slides provide a data-driven overview of environment, social and governance (ESG) activity at L&G. We demonstrate achievements to date, key metrics and some of our future commitments but these slides do not cover all ESG activity. ESG ratings Thir
Slide 39: ESG at L&G: Journey to net zero
ESG at L&G: Journey to net zero What have we achieved so far1 Updated exclusions for thermal coal2 and the LGIM Climate Impact Pledge stocks3 written into the Investment Management Agreements Invest Implemented additional governance and control around the acquisition of high carbon investments Devel
Slide 40: ESG at L&G: Building a better society
ESG at L&G: Building a better society What have we achieved so far Invested £1.5bn in the UK’s towns and cities Invested in over 300 companies through our venture capital investments and alternative finance platform, from universities to science laboratories to start-ups Donated over £11m to charity
Slide 41: ESG at L&G: Growing our business responsibly
ESG at L&G: Growing our business responsibly What have we achieved so far Improved our employee satisfaction score by 5 points as at October 2020 vs 2019 Extended healthcare cover to all employees As of May 2021, we have improved ethnic minority representation on our Board in response to the Parker
Slide 42: ESG at L&G: Growing our business responsibly
ESG at L&G: Growing our business responsibly LGIM Active Ownership 2018 2019 2020 Number of companies covered by our Climate Impact Pledge c. 80 c. 80 c. 1,0001 Number of company engagements from our Investment Stewardship team 236 739 891 Number of worldwide resolutions on which we voted2 48,788 50
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