Legal & General Group Plc · LSE:LGEN
Legal & General — FY2019 Earnings Presentation
29 slides from Legal & General's earnings presentation, February 2020
Slide 1: 2019 Full year results
2019 Full year results Delivering shareholder value through Inclusive Capitalism Achieved our 5 year EPS ambition in 4 years
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: Financial highlights
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: 16.
Slide 4: An established track record of consistent growth
An established track record of consistent growth Achieved our 5 year EPS ambition in 4 years, delivering 58% growth Operating profit from divisions1 (£m) Earnings per share (p) +58%2 11% CAGR 2,525 11% CAGR X 28.66 2,231 2,034 24.74 1,902 23.10 1,702 21.22 1,483 X 1,277 1,329 18.16 1,109 16.70 15.20
Slide 5: 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 6: We continue to deliver strong growth in new business
We continue to deliver strong growth in new business Division Business Product 2015 2016 2017 2018 2019 CAGR % 11,392 9,140 6,630 LGRI Pension Risk Transfer (PRT) Global bulk annuity premiums (£m) 2,417 3,948 47 86.4 43.5 42.6 LGIM Investment Management External net flows (£bn) 37.7 29.2 23 2,877 2,
Slide 7: A collaborative business model creating value for shareholders
A collaborative business model creating value for shareholders 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 capi
Slide 8: Financial highlights: Delivering shareholder value
Financial highlights Delivering shareholder value Jeff Davies Chief Financial Officer
Slide 9: 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 10: 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 11: 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 12: LGRR: Increasing annuity volumes driving profit growth
LGRR: Increasing annuity volumes driving profit growth 12 Operating Profit excl. mortality release (£m) Individual Annuity Sales (£m) Individual annuity sales up 22% to £970m 24% CAGR 970 • Higher sales benefiting from improved 795 enhanced annuity proposition and 298 671 increased intermediary pres
Slide 13: 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 AAA, 9% (£6.0bn) • Two-thirds A rated or better 6% AA, 23% (£16.0bn) • 22% of LGR’s bond portfolio invested in UK-listed corporate credit (ex. A, 34% (£24.0bn) Sov
Slide 14: 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 15: 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 16: 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 17: 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 18: 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 19: 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 • Coverage ratio of 184% 16.1 7.3 • Core tier 1 Own funds of £12.4bn (77%) 14.6 6.9 14.8 6.9 13.6 5.7 As at 28 February 2020, coverage ratio was 174%1 Own Funds Gro
Slide 20: Movement in the surplus
Movement in the surplus Solvency II surplus analysis of change (£bn) 188% 184% (1.0) 1.6 0.1 (0.2) 0.3 (0.6) 0.2 7.5 7.3 6.9 Surplus Operational External dividends Market Operating M&A New business Subordinated Surplus YE 2018 surplus (2018 Final + movements variances debt YE 2019 generation 2019 In
Slide 21: Financial highlights
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% 184% £1.6bn 17.57p 174%3 at 28 February 2020 +9% +7% Solvency II coverage ratio SII operational surplus generation Full year dividend 2018:
Slide 22: Building Inclusive Capitalism
Building Inclusive Capitalism Nigel Wilson Chief Executive Officer
Slide 23: 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 $30bn1 •
Slide 24: PRT: Large UK and US markets, with significant further potential
PRT: Large UK and US markets, with significant further potential UK PRT market (£bn) UK DB Liabilities (c£2.1tn) Ageing 42 Demographics 11% 24 On corporate balance sheets 12 10 12 Transferred to insurers 89% 2015 2016 2017 2018 2019* 2020* US PRT market ($bn) US DB Liabilities (c$3.5tn) 6% 30 27 23
Slide 25: 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 26: 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 27: 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 (lead
Slide 28: 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 29: 2019 Full year results
2019 Full year results Delivering shareholder value through Inclusive Capitalism Achieved our 5 year EPS ambition in 4 years