Legal & General Group Plc · LSE:LGEN
Legal & General — Investor Day (2024)
63 slides from Legal & General's investor day presentation, 2024
Slide 1: Delivering sustainable growth, sharper focus and enhanced returns
Highly Confidential Delivering sustainable growth, sharper focus and enhanced returns DRAFT 1
Slide 2: Forward-looking statements
Forward-looking statements This presentation and any related conference call or webcast (including any related Q&A session) may contain certain forward-looking statements relating to Legal & General, its plans and its current goals and expectations relating to future financial condition, performance
Slide 3: Agenda for today
Agenda for today 1. Group strategy António Simões, Group CEO 2. Financial metrics and reporting António Simões Jeff Davies, Group CFO Group CEO 3. Executing our strategy António Simões, Group CEO 4. Q&A Jeff Davies Group CFO 3 L&G Capital Markets Event 2024
Slide 4: Group strategy
Group strategy António Simões | Group CEO
Slide 5: A compelling vision for growth and shareholder value
Highly Confidential A compelling vision for growth and shareholder value A simpler, more synergistic model, Well-positioned businesses with becoming more capital-light over time Where is growth going to competitive advantages aligned to come from? structural trends Asset Management How will we captu
Slide 6: Sustainable growth, sharper focus, enhanced returns
Highly Confidential Sustainable growth, sharper focus, enhanced returns • Seizing the Institutional Retirement opportunity: £50-65bn of UK PRT (2024-28)1 Sustainable • Improving Asset Management profitability and investing to grow: cumulative ANNR2 of £100-150m (2025-2028) and private markets AUM of
Slide 7: Legal & General's strengths are clear
Highly Confidential Legal & General’s strengths are clear Purpose People Performance Proud heritage and Passionate and talented Market-leading, trusted brand over 188 years highly-synergistic businesses Strong leadership and culture Deep relationships with partners Strong balance sheet and capital a
Slide 8: We are in prime position to capitalise on structural shifts
Highly Confidential We are in prime position to capitalise on structural shifts Major structural shifts L&G positioning against trends Shifts in retirement responsibility Established, at-scale businesses in Institutional to insurers and individuals Retirement, Asset Management and Retail Climate tra
Slide 9: What has been holding us back from achieving our full potential?
Highly Confidential What has been holding us back from achieving our full potential? Lack of clarity on • Uncertainty about growth beyond Institutional Retirement Sustainable future growth • Need for a simpler investor case with more transparency Growth Portfolio complexity and • Strategic ambiguity
Slide 10: Part 1: Sustainable growth
Highly Confidential Part 1: Sustainable growth • Seizing the Institutional Retirement opportunity: £50-65bn of UK PRT (2024-28)1 Sustainable • Improving Asset Management profitability and investing to grow: cumulative ANNR2 of £100-150m (2025-2028) and private markets AUM of £85bn by 2028 Growth • G
Slide 11: Seizing the Institutional Retirement opportunity
Highly Confidential Seizing the Institutional Retirement opportunity UK Pension Risk Transfer (PRT) market opportunity 2.5 #1 UK PRT insurer over last 10 years 2.1 2.0 + Ability to transact across full range of UK deal sizes 2.0 2.0 1.9 1.8 1.8 1.7 1.7 1.7 + Longstanding relationships with DB scheme
Slide 12: Asset Management as the driver of our future vision
Highly Confidential Asset Management as the driver of our future vision Global Asset Management AUM Asset class: #1 UK Asset Manager by AUM; #11 globally 200 2023-28 CAGR 175 167 + Global scale and distribution network Private 150 Markets: 10% + Attractive investment and asset origination capability
Slide 13: Supporting customers through savings and retirement
Highly Confidential Supporting customers through savings and retirement Increasing UK personal wealth in Defined Contribution Asset growth: #1 UK DC provider by AUM (26% market share) 4.0 2023-33 CAGR 3.7 3.5 + Compelling lifetime solutions in accumulation and decumulation Decumulation 3.0 assets1:
Slide 14: Delivering reliable long-term growth
Highly Confidential Delivering reliable long-term growth Earnings shifting to capital-light Reliable stock of in-force earnings businesses over the next decade Institutional Significant new business opportunity Retirement Steady and reliable store of future profits + Attractive patient capital for a
Slide 15: Part 2: Sharper Focus
Highly Confidential Part 2: Sharper Focus • Seizing the Institutional Retirement opportunity: £50-65bn of UK PRT (2024-28) • Seizing the Institutional Retirement opportunity: £50-65bn UK PRT over next 5 years Sustainable • Improving Asset Management profitability and investing to grow: cumulative AN
Slide 16: A compelling vision for growth and shareholder value
Highly Confidential A compelling vision for growth and shareholder value Until Now From Today Asset Management • Blended public and L&G Investment private investment Management Distribution and Operating Model solutions (LGIM) • Differentiated asset Public Markets Private Markets origination underpi
Slide 17: A new framework for capital investment decisions
Highly Confidential A new framework for capital investment decisions … Financial performance Strategic assessment aligned to our future vision of a simpler, more synergistic business • Filter 1: Strategic attractiveness (market dynamics, L&G ‘right to win’) • Filter 2: Synergistic value to other L&G
Slide 18: … resulting in a clear set of priorities
Highly Confidential … resulting in a clear set of priorities Financial performance RETAIL INSTITUTIONAL UK PRT RETIREMENT International PRT CALA Invest and grow Protection businesses CORPORATE INVESTMENTS UNIT Private A new Corporate Investments unit Markets for £1.9bn of non-strategic assets, UK Sa
Slide 19: CALA is a high-performing business
Highly Confidential CALA is a high-performing business Homes Revenue Profit Strong financial performance under L&G leadership CALA’s revenues and profits have grown by 5x and 10x respectively since 2013 Operational scale 2013 850 £240m £11m CALA has grown from a medium-sized housebuilder to the 10th
Slide 20: Part 3: Enhanced Returns
Highly Confidential Part 3: Enhanced Returns • Seizing the Institutional Retirement opportunity: £50-65bn of UK PRT (2024-28) Sustainable • Improving Asset Management profitability and investing to grow: cumulative ANNR of £100-150m (2025-2028) and private markets AUM of £85bn by 2028 Growth • Growi
Slide 21: Our synergistic model as a competitive advantage (1 of 4)
Highly Confidential Our synergistic model as a competitive advantage (1 of 4) Asset Management and Institutional Retirement Conversion of longstanding client relationships Asset Management c.23 year DB scheme relationship and ongoing DC scheme mandate Converted into a £4.8bn PRT deal, completed in 2
Slide 22: Our synergistic model as a competitive advantage (2 of 4)
Highly Confidential Our synergistic model as a competitive advantage (2 of 4) Asset Management and Retail Broader range of at-retirement solutions Asset Management DC ISAs, Individual Drawdown pensions SIPPs etc annuities Improved proposition from bundled administration and asset management Institut
Slide 23: Our synergistic model as a competitive advantage (3 of 4)
Highly Confidential Our synergistic model as a competitive advantage (3 of 4) Institutional Retirement and Retail Home Finance as an asset origination channel Long-term financing of UK housing well-matched to long-dated annuity liabilities Asset Management £5.3bn UK lifetime mortgage loans as at FY2
Slide 24: Our synergistic model as a competitive advantage (4 of 4)
Highly Confidential Our synergistic model as a competitive advantage (4 of 4) Strong businesses in US Institutional Retirement Global asset with positive momentum outside the UK management expansion $3trn US market opportunity Global distribution of products • Institutional Retirement: US manufactur
Slide 25: Our shared sense of purpose further compounds value
Highly Confidential Our shared sense of purpose further compounds value Authentic purpose underpinning our admired, trusted brand Asset Management Fostering long-term customer, client and partner relationships Enabling access to profitable asset origination Giving credibility to engage in active own
Slide 26: Sustainable growth, sharper focus, enhanced returns
Highly Confidential Sustainable growth, sharper focus, enhanced returns • Seizing the Institutional Retirement opportunity: £50-65bn of UK PRT (2024-28)1 Sustainable • Improving Asset Management profitability and investing to grow: cumulative ANNR2 of £100-150m (2025-2028) and private markets AUM of
Slide 27: Financial metrics and reporting
Financial metrics and reporting Jeff Davies | Group CFO
Slide 28: Aligning the financials to our strategy
Highly Confidential Aligning the financials to our strategy Sustainable • Group financial targets FY24-27 Growth • Growing the store of future profit • Financial reporting implications of creating: Sharper – A single Asset Management division Focus – A Corporate Investments unit • Balance sheet stre
Slide 29: Our three-year financial targets
Highly Confidential Our three-year financial targets 6–9% CAGR in Core Operating EPS (FY24-FY27) Operating Return on Equity of at least 20% (2025, 2026, 2027) Cumulative capital generation of £5-6bn (2025, 2026, 2027) 29 L&G Capital Markets Event 2024 Note: See appendix p63 for the definitions
Slide 30: Growing our store of future profit
Highly Confidential Growing our store of future profit Illustrative movement in store of future profit from writing £10bn of UK PRT per annum 12 Our in-force book will continue to Institutional Retirement (£bn) 10 release into operating profit Store of future profit – 8 6 We will continue to write p
Slide 31: Where are LGC's assets going?
Highly Confidential Where are LGC’s assets going? FY23 impact Operating Balance sheet profit (£m) assets (£bn) Asset origination platforms Asset Management 176 1.0 and development capital Institutional Retirement 142 3.2 Co-investment balance sheet and traded assets Retail (annuities) 40 0.9 Non-str
Slide 32: Our HY24 results will reflect our new structure
Highly Confidential Our HY24 results will reflect our new structure FY23 operating profit (£m) LGC Profit Previous divisional structure Updated divisional structure Allocation1 Legal & General Retirement Institutional (LGRI) 886 + 142 1,028 Institutional Retirement Legal & General Capital (LGC) 510
Slide 33: The strength of our balance sheet
Highly Confidential The strength of our balance sheet SII Debt Leverage (FY23 %)1 SII Coverage Ratio (FY23): 224% Strength of our balance sheet provides strategic optionality to: 34 Own 16.6 9.2 Surplus Funds • Capitalise on the Institutional 27 Retirement opportunity • Invest in capital-light, fee-
Slide 34: Returns underpinned by a high-quality portfolio
Highly Confidential Returns underpinned by a high-quality portfolio Strong portfolio and track record Rigorous approach to managing credit risk 99% High quality, diversified Credit risk portfolio rated investment grade investment grade book 8% Exposure to UK cyclicals Independent Credit Ratings team
Slide 35: A clear capital allocation policy
Highly Confidential A clear capital allocation policy Maintain a strong balance sheet Strong and sustainable 1 balance sheet Sustainable capital generation from our divisions Disciplined investment in organic growth opportunities 2 Investment for growth Potential bolt-on acquisitions (Asset Manageme
Slide 36: The Board intends to return more to shareholders
Highly Confidential The Board intends to return more to shareholders 2024-2027 Capital Returns (£m) Buybacks Our capital returns • The Board intends to return more to shareholders approach over 2024-2027 than the equivalent of maintaining 5% per annum growth in dividends per share (DPS) Buybacks • T
Slide 37: Executing our strategy
Executing our strategy António Simões | Group CEO
Slide 38: Executing at pace and with rigour
Highly Confidential Executing at pace and with rigour • Creation of a Transformation Office to oversee Group-wide change Transformation • Disciplined prioritisation of transformation activities • Simplifying processes, modernising systems, digitalizing solutions Technology • Embedding data insight a
Slide 39: Institutional Retirement
Highly Confidential Institutional Retirement Key messages Key metrics A. Well positioned to address the significant market £50-65bn opportunity in the UK UK PRT, 2024-28 B. PRT creates a store of future profit and permanent capital for our Asset Management business <4% For every £10bn new business,
Slide 40: Well-positioned for the growth opportunity
Highly Confidential A Well-positioned for the growth opportunity 90 80 Paradigm shift in UK PRT market to a new c.£45bn p.a. world, subject to ‘lumpiness’ 70 arising from timing of large (£5bn+) deals Annual PRT volumes (£bn) 60 50 New baseline c.£45bn p.a. 40 30 Baseline £25bn p.a. 20 Baseline £10b
Slide 41: Creating a large store of future profit
Highly Confidential B Creating a large store of future profit … Illustrative benefits of writing £10bn of UK PRT Store of future profit £800m Institutional Retirement Lifetime £10bn IFRS PRT new business earnings Fee-related earnings £100m Asset Management At <4% strain, requires: Effective 5x multi
Slide 42: … with reliable capital flows over time
Highly Confidential B … with reliable capital flows over time Writing £10bn of UK PRT generates more than £1.5bn of OSG for the Group over time >£1.5bn Cumulative Solvency Operational Surplus Generation Payback 4 years 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Slide 43: Significant international growth opportunities
Highly Confidential C Significant international growth opportunities FY23 DB assets (trn) % Market L&G positioning and future strategy Local GBP Insured Established, well-positioned business 1.8 1.8 16% Growth enabled by differentiated asset origination from L&G domestic our newly combined in-house
Slide 44: Asset Management
Highly Confidential Asset Management Key messages Key metrics A. Well-placed in an attractive global market £500-600m Our vision for the business aligns to changing client needs and we have the building blocks for success Operating Profit by 2028 B. Targeted plans to deliver sustainable profitable g
Slide 45: Well-placed in an attractive global market
Highly Confidential A Well-placed in an attractive global market Global AUM and revenue evolution (2023-28) 7% 200 7% Revenue CAGR L&G core 597 FY23 AUM 600 (2023-28)1 capability 175 167 Private Credit 11% £36bn L&G + 150 18% 500 Infrastructure 8% £12bn 46% Real Estate 5% Pemberton 421 119 Global re
Slide 46: Our strategy reflects changing client needs
Highly Confidential A Our strategy reflects changing client needs Client needs Our strategy Holistic service proposition including blended Fewer, larger manager relationships public and private market solutions Investment opportunities Increased proximity to clients with 12 offices globally for a gl
Slide 47: We have the building blocks for success
Highly Confidential A We have the building blocks for success Distribution Investments Core functions Deep expertise across major asset classes At-scale supporting infrastructure Global sales coverage Index Active Fixed Income UK Continental Europe Global equities Global Bond Strategy and research A
Slide 48: Global trusted distribution
Highly Confidential A Global trusted distribution AUM by client type AUM by geography 5% 3% UK International AUM of 40% 18% Pension funds Europe ex-UK 24% Internal client Asia Pacific FY23 63% FY23 Other Institutional Americas AUM Stockholm 12% AUM Wholesale Amsterdam 60% MENA 8% Dublin London Frank
Slide 49: Attractive investment capabilities and performance
Highly Confidential A Attractive investment capabilities and performance £1.2trn £902m FY23 revenue Investment out- margins performance1 Recent successes 36 143 169 Private Growing Pemberton product range with 41 bps 86% markets2 Working Capital Finance and NAV Lending 84 228 Fixed Strategic Bond Fu
Slide 50: Creating a single Asset Manager to drive growth
Highly Confidential B Creating a single Asset Manager to drive growth Blended Public and Private International presence for an Responsible investment Markets solutions international client base aligned to client values Leading public markets capability 40% of AUM is international £378bn Responsible
Slide 51: Investing to support our long-term vision
Highly Confidential B Investing to support our long-term vision Continued investment • Partnership with State Street to create a globally consistent, automated + in operational scalability and seamless experience for clients & employees • Final phase of the programme to be delivered by H1 2026 • Inv
Slide 52: Compelling growth opportunities to drive ANNR
Highly Confidential C Compelling growth opportunities to drive ANNR New product and channel opportunities to drive revenue margin expansion from current 7bps Opportunities How we will win + Active Fixed Income 15-25 bps1 Leveraging our fixed income experience from our c.£100bn balance sheet Product
Slide 53: Private markets to grow to £85bn AUM
Highly Confidential C Private markets to grow to £85bn AUM Growth in L&G Private Markets AUM … … driven by accelerated distribution of our diverse range of capabilities 90 85 Investment-Grade credit New fundraising successes 80 Private ADIA anchor investment for Credit NAV Financing – June 2024 25 P
Slide 54: Retail
Highly Confidential Retail Key features of our strategy Key metrics A. Capitalising on the Workplace DC opportunity 6-8% CAGR through digital transformation Operating Profit, FY23-28 B. Embedding our holistic decumulation proposition £40-50bn through hybrid engagement Workplace net flows, 2024-28 C.
Slide 55: Supporting customers through their lifetime
Highly Confidential Supporting customers through their lifetime A Asset accumulation At retirement B Asset decumulation Workplace DC as an acquisition channel, Helping customers make Holistic retirement proposition: flexible, guaranteed establishing lifetime relationships good retirement decisions i
Slide 56: Capitalising on the Workplace DC opportunity
Highly Confidential A Capitalising on the Workplace DC opportunity Forecast Workplace DC assets (£bn) L&G Workplace digital transformation 949 Largest Commercial 637 £27bn UK Mastertrust Digitisation of our consolidation journey doubled monthly volumes and lowered unit Target Net flows costs by 40%
Slide 57: Embedding our holistic decumulation proposition
Highly Confidential B Embedding our holistic decumulation proposition Hybrid help and advice Individual Annuities Drawdown Lifetime Mortgages Important future source of Proposition Seamless access to guaranteed and flexible retirement income retirement funding Market Strong growth driven by DC growt
Slide 58: Maximising profitability in Protection
Highly Confidential C Maximising profitability in Protection Established, scaled business Competitively positioned to Focused on improving efficiency with strong track-record deliver growth through technology, data and AI Enhance intermediary platform to Retail drive new distributor wins Aggregate 5
Slide 59: Closing statements
Closing statements
Slide 60: Sustainable growth, sharper focus, enhanced returns
Highly Confidential Sustainable growth, sharper focus, enhanced returns • Seizing the Institutional Retirement opportunity: £50-65bn of UK PRT (2024-28)1 Sustainable • Improving Asset Management profitability and investing to grow: cumulative ANNR2 of £100-150m (2025-2028) and private markets AUM of
Slide 61: Q&A
António Simões, Group CEO Jeff Davies, Group CFO Emma Hardaker-Jones, Chief Transformation and People Officer Q&A Bernie Hickman, CEO Retail Andrew Kail, CEO Institutional Retirement Laura Mason, CEO Private Markets Michelle Scrimgeour, CEO LGIM
Slide 62: Appendix
Appendix
Slide 63: Financial target definitions
Highly Confidential Financial target definitions Metric Definition Core Operating Profit Operating profit performance of the core businesses (excluding the Corporate Investments unit) less Group debt and expenses Core Operating EPS Core Operating Profit, reduced by tax at the UK corporation tax rate