Legal & General Group Plc · LSE:LGEN
Legal & General — Investor Day (May 2013)
64 slides from Legal & General's investor day presentation, May 23, 2013
Slide 1: Savings Investor Day
LEGAL & GENERAL SAVINGS. 1 SAVINGS INVESTOR DAY. 23 May 2013 EVERY DAY MATTERS
Slide 2: Forward Looking Statements
LEGAL & GENERAL SAVINGS. 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 st
Slide 3: Agenda
LEGAL & GENERAL SAVINGS. 3 AGENDA. Mark Gregory Chief Executive Officer Strategic Overview Savings Chris Rhodes Executive Director Group Banks and Building Society Distribution: A Leading Retail Mass Market Distribution Model Nationwide Building Society Positioned to Gather Assets: Mark Gregory Bank
Slide 4: Savings Integral to Group Strategy
LEGAL & GENERAL SAVINGS. 4 SAVINGS INTEGRAL TO GROUP STRATEGY. GROWTH DRIVERS GROUP RESPONSE SAVINGS RESPONSE AGEING RETIREMENT POPULATIONS SOLUTIONS PENSIONS AND RETIREMENT DIGITAL DIGITAL SAVINGS LIFESTYLES SOLUTIONS WELFARE LEADING DIGITAL PROTECTION REFORMS PLATFORMS HOMOGENOUS LGIM ASSET MARKET
Slide 5: Leveraging Mature to Drive Growth
LEGAL & GENERAL SAVINGS. 5 LEVERAGING MATURE TO DRIVE GROWTH. Customer access through all distribution channels Banks & Growth Retail Workplace Business Building Cofunds Suffolk Life Investments Savings Societies Mature Insured Insured With-Profits Structured Business Pensions Bonds
Slide 6: Asset Gatherer Strategy
LEGAL & GENERAL SAVINGS. 6 ASSET GATHERER STRATEGY. High scale assets High quality earnings Attractive margins and capital light Flows Digital platforms Operational leverage Strong asset growth Flows Legal & General Group Vertical integration Good value for customers
Slide 7: Long Term Growth Opportunities
LEGAL & GENERAL SAVINGS. 7 LONG TERM GROWTH OPPORTUNITIES. Banks & Retail Workplace Building Cofunds Investments Savings societies Mature Business Gateway cash and to wider profit Attractive propositions. Efficient and scaleable Group support GROWING ASSET BASE LEGAL & GENERAL INVESTMENT MANAGEMENT
Slide 8: Demonstrable Execution
LEGAL & GENERAL SAVINGS. 8 DEMONSTRABLE EXECUTION. 2008 2009-2012 2013… Cash Generative: £117m Exploiting Opportunities Executed Turnaround Asset Gatherer Capital Light Vertical Integration £(23)m Net Cash Strong Foundation £110bn Assets¹ £70bn £133m £7m Assets Operating £46bn Operating Profit Asset
Slide 9: £110bn of Assets Generating Revenues
LEGAL & GENERAL SAVINGS. 9 £110BN OF ASSETS GENERATING REVENUES. Acquisition • No. 1 UK platform by assets³ £36bn¹ ² • Earnings accretive • Synergy benefits Organic • Access to 21m building society members 4 • £9.1bn on Investor Portfolio Service (IPS) platform¹ £32bn¹ • Over 500,000 Workplace custo
Slide 10: Driving Long Term Shareholder Value
LEGAL & GENERAL SAVINGS. 10 DRIVING LONG TERM SHAREHOLDER VALUE. Growing Assets Revenue Generating Profit Acquisition Advice Charge Direct Platform Operating Charge Expenses Organic Product Charge Fund Investment Charge Gross Mature contribution Net contribution Low capital deployment
Slide 11: Leveraging the Full Value Chain
LEGAL & GENERAL SAVINGS. 11 LEVERAGING THE FULL VALUE CHAIN. Banks & Retail Workplace Building Cofunds Investments Savings Societies Closer and greater access to a broad customer base Scale Fund Retail Product Distribution Customer- Manufacture Investments Wrapper and Advice Lifetime Value PLATFORM
Slide 12: Providing a Gateway to Legal & General
LEGAL & GENERAL SAVINGS. 12 PROVIDING A GATEWAY TO LEGAL & GENERAL. Customer for Life Model Savings Assets £ Retire Post retirement Home savings assets purchase continue to Long term Children deliver value care for group First job Age 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Savings INDIVIDUAL P
Slide 13: Exploiting Asset Gathering Opportunities
LEGAL & GENERAL SAVINGS. 13 EXPLOITING ASSET GATHERING OPPORTUNITIES. Advice Gap Passive Funds DC Pensions UK Platforms Market Potential 5.5m 2013-2017 2013-2022 2013-2017 unsupported 8-20% CAGR² 12% CAGR³ 11-18% CAGR4 customers¹ Banks & Retail Workplace Building Cofunds Investments Savings societie
Slide 14: Delivering mutuality in partnership
2013 Delivering mutuality in Chris Rhodes partnership Executive Director Group Retail
Slide 15: Video Placeholder
LEGAL & GENERAL SAVINGS. 15 VIDEO PLACEHOLDER No.1 Threadneedle street
Slide 16: Delivering Mutuality in Partnership
LEGAL & GENERAL SAVINGS. 16 DELIVERING MUTUALITY IN PARTNERSHIP.
Slide 17: Delivering Mutuality in Partnership
LEGAL & GENERAL SAVINGS. 17 DELIVERING MUTUALITY IN PARTNERSHIP. Advice on Why Legal & Our position Our the High General? today potential Street
Slide 18: Why Legal & General?
LEGAL & GENERAL SAVINGS. 18 WHY LEGAL & GENERAL? Why Legal & General? Great systems and Complimentary Brands processes Why Legal & General? Market leading platform Strategic Collaboration and fund panel service
Slide 19: Advice on the High Street
LEGAL & GENERAL SAVINGS. 19 ADVICE ON THE HIGH STREET. Advice on the High Street Simple pricing – Advice to the Mass sustainable Affluent through mutuality Helping members TRUSTED make the most of ADVISOR their money Restricted to Competitive mainstream platform products Powered by
Slide 20: Advice on the High Street
LEGAL & GENERAL SAVINGS. 20 ADVICE ON THE HIGH STREET. Advice on the High Street Hand picked Defaqto 5* investment funds Protection products TRUSTED ADVISOR Award winning ‘On Your Side’ “Nationwide's new Annuity proposition Protection pricing (annuity) service is good news for consumer choice”
Slide 21: Advice on the High Street
LEGAL & GENERAL SAVINGS. 21 ADVICE ON THE HIGH STREET. Advice on the High Street Mr Grey Mr Black Typically older Lump sum investor Typically younger Regular investor Investing to maintain wealth Investing to grow and distribute their wealth income Protect their home More complex and family needs
Slide 22: Our Demographic
LEGAL & GENERAL SAVINGS. 22 OUR DEMOGRAPHIC. Our position 6.3m today Valuable Customer based demographic vs. UK market members 30% 25% 20% 15% 10% 5% 0% Affluent Low Affluent Affluent Low Affluent Affluent Low Affluent Affluent Low Affluent Students Starting out Homemakers Maturing Retired UK Market
Slide 23: Our Position Today
LEGAL & GENERAL SAVINGS. 23 OUR POSITION TODAY. Our position today £10.6bn 560k Investment customers Market share 501k 3.0% Protection 74% are new Customers to investing with protected 8.3% Investments Nationwide A growing population of Mortgage & protection advisors 450 385 Senior Financial Consult
Slide 24: Our Potential
LEGAL & GENERAL SAVINGS. 24 OUR POTENTIAL. Our potential 89% of our c84% of the UK investors population less hold another £126bn product held by 8.2m than 5miles Savings customers from a branch c700 branches 630k with over £50k 16m online 2.2m Mortgage visitors every month customers 1.9m without pro
Slide 25: Delivering Mutuality in Partnership
LEGAL & GENERAL SAVINGS. 25 DELIVERING MUTUALITY IN PARTNERSHIP. STRENGTH IN PARTNERSHIP Powered by Here for our Unique on the the experts Members High Street
Slide 26: Mark Gregory
26 MARK GREGORY. LEGAL & GENERAL SAVINGS. CHIEF EXECUTIVE OFFICER, SAVINGS
Slide 27: Profitably Serving Middle Market Investors
LEGAL & GENERAL SAVINGS. BANKS AND BUILDING SOCIETIES 27 PROFITABLY SERVING MIDDLE MARKET INVESTORS. Banks & Retail Workplace Building Cofunds Investments Savings Societies Mature Business Gateway cash and to wider profit Attractive propositions. Efficient and scaleable Group support GROWING ASSET B
Slide 28: Benefiting from the Impact of RDR
LEGAL & GENERAL SAVINGS. BANKS AND BUILDING SOCIETIES 28 BENEFITING FROM THE IMPACT OF RDR. POST RDR Mass market Middle market Mass affluent to High net worth <£25K¹ £25K-£100K £100K+ 5.5 million people still needing support Legal & General Banks & Building Societies Legal & General Legal & General
Slide 29: Scaleable, Flexible and Broad Reach
LEGAL & GENERAL SAVINGS. BANKS AND BUILDING SOCIETIES 29 SCALEABLE, FLEXIBLE AND BROAD REACH. SECURED HIGH STREET PRESENCE ACHIEVING SCALE AND EFFICIENCY Building Society Assets¹ Investor Portfolio Service (IPS) Assets² £9bn £48bn Other 21m non-L&G members L&G Partners £271bn 85% Total Assets c.1,40
Slide 30: Digital: The Enabler of Economic Advice
LEGAL & GENERAL SAVINGS. BANKS AND BUILDING SOCIETIES 30 DIGITAL: THE ENABLER OF ECONOMIC ADVICE. Customer Products Ongoing Further investment Platform Advice and Funds Service and funds growth Advice Product Platform Service Further revenue Charge Charge Charge Charge Fund Charge 97% customers elec
Slide 31: Housing Assets to Drive Savings Growth
LEGAL & GENERAL SAVINGS. 31 HOUSING ASSETS TO DRIVE SAVINGS GROWTH. UK housing turnover and household deposit growth¹ 300 100 UK housing turnover and household deposit growth 90 1981 TO 2011 250 80 • Home ownership from 58% to 64%² 70 200 60 • 200% real increase in house prices² 150 50 40 OPTIONS FR
Slide 32: One Relationship - Multiple Benefits
LEGAL & GENERAL SAVINGS. BANKS AND BUILDING SOCIETIES 32 ONE RELATIONSHIP - MULTIPLE BENEFITS. Mortgage Club Largest distributor of L&G Protection Sales mortgages in UK, 25% of intermediated mortgage £16m Annual Premium lending market Equivalent £19bn mortgage completions in club LGIM Funds Housing
Slide 33: Profitable Scale Growth
LEGAL & GENERAL SAVINGS. BANKS AND BUILDING SOCIETIES 33 PROFITABLE SCALE GROWTH. Banks & Retail Workplace Building Cofunds Investments Savings Societies Mature Business Gateway cash and Attractive propositions. Efficient and scaleable to wider profit GROWING ASSET BASE Group support 12-16% CAGR¹ LE
Slide 34: Retail Funds Business: Retail Investments
LEGAL & GENERAL SAVINGS. RETAIL INVESTMENTS 34 RETAIL FUNDS BUSINESS: RETAIL INVESTMENTS. Banks & Retail Workplace Building Cofunds Investments Savings Societies Mature Business Gateway cash and to wider profit Attractive propositions. Efficient and scaleable Group support GROWING ASSET BASE LEGAL &
Slide 35: Growth Retail Business with 'LGIM' Inside
LEGAL & GENERAL SAVINGS. RETAIL INVESTMENTS 35 GROWTH RETAIL BUSINESS WITH ‘LGIM’ INSIDE. DELIVERING SCALE GROWTH DIVERSIFIED DISTRIBUTION L&G Retail Investments Core Retail Assets³ SAVINGS RETAIL INVESTMENTS £12bn DESIGN MARKET Mutual Funds £8bn £12bn Assets¹ ³ 60% Direct Cost/Income Ratio² Core As
Slide 36: Growing Demand for Passive Retail Funds
LEGAL & GENERAL SAVINGS. RETAIL INVESTMENTS 36 GROWING DEMAND FOR PASSIVE RETAIL FUNDS. Retail Passive Market Potential AUA¹ SIGNIFICANT MARKET GROWTH EXPECTED Post RDR Accelerated 11-20% • Commission differentials removed Trend In Line With 2009 to 2012 CAGR • Reduced passive fees Growth • L&G has
Slide 37: Profitable Scale Growth
LEGAL & GENERAL SAVINGS. RETAIL INVESTMENTS 37 PROFITABLE SCALE GROWTH. Banks & Retail Workplace Building Cofunds Investments Savings Societies Mature Business Gateway cash and Attractive propositions. Efficient and scaleable to wider profit GROWING ASSET BASE Group support 12-16% CAGR 5-15% CAGR¹ L
Slide 38: Exploiting the Opportunity
LEGAL & GENERAL SAVINGS. WORKPLACE 38 EXPLOITING THE OPPORTUNITY. Banks & Retail Workplace Building Cofunds Investments Savings Societies Mature Business Gateway cash and to wider profit Attractive propositions. Efficient and scaleable Group support GROWING ASSET BASE LEGAL & GENERAL INVESTMENT MANA
Slide 39: Digital Proposition Driving Inflows
LEGAL & GENERAL SAVINGS. WORKPLACE 39 DIGITAL PROPOSITION DRIVING INFLOWS. COMPREHENSIVE PROPOSITION DIGITAL CAPACITY • Over 800,000 customers by end 2013 Auto enrolment Scheme Restructuring • Capacity to load over 100,000 per day • Auto enrolled over 200,000 employees New Schemes • 140+ schemes con
Slide 40: Momentum on Scale and Efficiency
LEGAL & GENERAL SAVINGS. WORKPLACE 40 MOMENTUM ON SCALE AND EFFICIENCY. MARKET POTENTIAL SCHEME PHASING Growth in UK DC assets¹ £829bn Number of Employers 38,000 Staging² £276bn 6,000 2012 2022 2013 2014 MOMENTUM ON SCALE ACHIEVING OPERATIONAL LEVERAGE Non profit AUA £7bn Total Unit Costs and 100 46
Slide 41: Auto-Enrolment Timetable
LEGAL & GENERAL SAVINGS. WORKPLACE 41 AUTO-ENROLMENT TIMETABLE. Employee Steady 3% 1% jobholder contribution¹ State 5% jobholder jobholder Phasing 8% Employer Steady 2% 1% employer contribution State 3% employer employer Employers can pay higher contributions and stage earlier Large Medium Small Sta
Slide 42: Australian Experience Points Way to Rapid Growth in UK DC Assets
LEGAL & GENERAL SAVINGS. 42 AUSTRALIAN EXPERIENCE POINTS WAY TO RAPID GROWTH IN UK DC ASSETS. AUSTRALIAN SUPERANNUATION Total superannuation assets (AUD)¹ • Compulsion from 1992 • Assets growth 18%+ p.a. in last 10 years $1,401bn (UK 9.3%, US 6.5%)² $1,131bn • Superannuation assets are 96% of Austra
Slide 43: Building a Profitable Scale Model
LEGAL & GENERAL SAVINGS. WORKPLACE 43 BUILDING A PROFITABLE SCALE MODEL. Banks & Retail Workplace Building Cofunds Investments Savings Societies Mature Business Gateway cash and Attractive propositions. Efficient and scaleable to wider profit GROWING ASSET BASE Group support 12-16% CAGR 5-15% CAGR 1
Slide 44: Chris Last - Cofunds Opportunity
CHRIS LAST. LEGAL & GENERAL SAVINGS. 44 CEO DESIGNATE COFUNDS. COFUNDS OPPORTUNITY EVERY DAY MATTERS
Slide 45: Platforms an Essential Adviser Tool
LEGAL & GENERAL SAVINGS. COFUNDS 45 PLATFORMS AN ESSENTIAL ADVISER TOOL. Why use platforms? Investor Portfolio Advisers Service Time and transactional Competitive Specific to tied and cost savings + proposition + bancassurance market Low cost way of Value for money access Integrated within managing
Slide 46: Migration of Assets
LEGAL & GENERAL SAVINGS. COFUNDS 46 MIGRATION OF ASSETS. Investment Platform Sector Growth to 2017 MARKET DRIVERS • Assets on platforms 8% of total UK investible £bn assets on platforms¹ 1600 assets¹ ² 1400 Optimistic • RDR potential to accelerate: Realistic 1200 19-25% • Distributor drive for effic
Slide 47: Crowded Market: Scale Is Key
LEGAL & GENERAL SAVINGS. COFUNDS 47 CROWDED MARKET: SCALE IS KEY. Platform Size Q1 2013 AUA £bn² Cofunds 52.3 COFUNDS WELL POSITIONED Skandia 44.9 • Explicit pricing already implemented¹ Fidelity 43.6 • Diversified across multiple market segments Hargreaves Lansdown 33.7 • Embedded with large nation
Slide 48: Scale Through Multiple Channels
LEGAL & GENERAL SAVINGS. COFUNDS 48 SCALE THROUGH MULTIPLE CHANNELS. 48%¹ Self Directed Independent Position Cofunds - Retail Advisory Value for Money Wealth Managers 20%¹ Bancassurance L&G – Investor Portfolio Packaged Solution Direct Service Trusted Provider Tied Distributors 32%¹ Cofunds - Instit
Slide 49: On Journey to Profitable Scale
LEGAL & GENERAL SAVINGS. COFUNDS 49 ON JOURNEY TO PROFITABLE SCALE. Cofunds Assets Cofunds Profit £52bn £4m 2006 2012 £10bn 2006 Q1 2013 £(12)m Cofunds Revenue JOURNEY £74m • Focus to date on growth • Scale has driven revenue • Future focus on growth and efficiency • Continue integration with distri
Slide 50: Plan for Scale Efficiencies
LEGAL & GENERAL SAVINGS. COFUNDS 50 PLAN FOR SCALE EFFICIENCIES... Phase 1 Phase 2 Phase 3 Corporate Integration: Corporate Synergies: Operational Synergies Acquisition and take-on De-duplication and De-duplication and optimisation of sales, optimisation of marketing and corporate operational functi
Slide 51: Opportunities for Further Value
LEGAL & GENERAL SAVINGS. COFUNDS 51 …OPPORTUNITIES FOR FURTHER VALUE. Fund Fund Extend Products Distribution Selection Solutions Reach Direct to customer options Potential further bancassurance/other partners Pensions 6% of AUA v c. 30% on comparable platforms¹ Fund Solutions – leverage L&G design a
Slide 52: Building a Profitable Scale Model
LEGAL & GENERAL SAVINGS. COFUNDS 52 BUILDING A PROFITABLE SCALE MODEL. Banks & Retail Workplace Building Cofunds Investments Savings Societies Mature Business Gateway cash and Attractive propositions. Efficient and scaleable to wider profit GROWING ASSET BASE Group support 12-16% CAGR 5-15% CAGR 16-
Slide 53: Andrea Blance - Framework for Driving Results
ANDREA BLANCE. LEGAL & GENERAL SAVINGS. 53 CHIEF FINANCIAL OFFICER SAVINGS FRAMEWORK FOR DRIVING RESULTS EVERY DAY MATTERS
Slide 54: Driving Long Term Shareholder Value
LEGAL & GENERAL SAVINGS. 54 DRIVING LONG TERM SHAREHOLDER VALUE. Growing Assets Revenue Generating Profit Acquisition Advice 82bps¹ Revenue Charge Direct Platform Operating Charge Expenses Organic Product Charge Fund Investment Charge Gross Mature contribution Net contribution Low capital deployment
Slide 55: Track Record of Executing on Strategy
LEGAL & GENERAL SAVINGS. 55 TRACK RECORD OF EXECUTING ON STRATEGY. Net Cash Generation £117m KEY MEASURES TAKEN • Headcount reduced 20% 2008 to 2010 • Commission payments reduced • Product structures improved • Right sized IFA account management • New business strain down from £161m 2008 2012 in 200
Slide 56: Improving Transparency and Driving Performance
LEGAL & GENERAL SAVINGS. 56 IMPROVING TRANSPARENCY AND DRIVING PERFORMANCE. NEW METRICS TRANSITION PROCESS NEW METRICS AUA FIRST PASS Fee Revenues Net Fund Flows STARTED Gross Contribution EMBEDDING Operating Profit MD Fee to Fund PERFORMANCE Cost to Income CONTRACTS SYSTEM CHANGES: ALIGN PRIOR PROJ
Slide 57: Retail Investments: A Profitable Model for Savings
LEGAL & GENERAL SAVINGS. 57 RETAIL INVESTMENTS: A PROFITABLE MODEL FOR SAVINGS. Operating Profit Growth £30m ASSET METRICS EMBEDDED Net Direct Cost: AUA Contribution Income Margin 2008 £8bn 15bps 78% £8m 2012 £11bn 31bps 60% 2008 2012 2012 Profit¹ £m Fee based revenues 100 Direct operating expenses
Slide 58: Key Priorities
LEGAL & GENERAL SAVINGS. 58 KEY PRIORITIES. A SCALEABLE PROFITABLE ASSET GATHERER BANKS & BUILDING RETAIL WORKPLACE COFUNDS SOCIETIES INVESTMENTS SAVINGS Exploiting market Drive further position and Further cost Investing to create revenue and cost leveraging scale efficiencies scale efficiencies SY
Slide 59: Mark Gregory - The Long Term Prize
MARK GREGORY. LEGAL & GENERAL SAVINGS. 59 CHIEF EXECUTIVE OFFICER, SAVINGS THE LONG TERM PRIZE EVERY DAY MATTERS
Slide 60: Vision for Long Term Value Creation
LEGAL & GENERAL SAVINGS. 60 VISION FOR LONG TERM VALUE CREATION. AN ASSET GATHERING, “FEES LESS EXPENSES” BUSINESS • Delivering steady year-on-year progress • Selected a differentiated portfolio across attractive growth markets • Focus on building long term value • Operational excellence is in our D
Slide 61: Track Record of Delivery
LEGAL & GENERAL SAVINGS. 61 TRACK RECORD OF DELIVERY. UK PROTECTION INVESTMENT MANAGEMENT UK Protection Premiums LGIM Total Assets under Management £406bn £1.3bn £1.2bn £315bn £1.1bn £0.9bn £233bn £135bn £111bn £0.3bn 2001 2006 2008 2010 2012 2000 2003 2006 2009 2012 Strength in industrial processes
Slide 62: Building a Profitable Asset Gatherer
LEGAL & GENERAL SAVINGS. 62 BUILDING A PROFITABLE ASSET GATHERER. Banks & Retail Workplace Building Cofunds Investments Savings societies Mature Business Gateway cash and Attractive propositions. Efficient and scaleable to wider profit GROWING ASSET BASE Group support 12-16% CAGR¹ 5-15% CAGR¹ 16-23%
Slide 63: Asset Gatherer Strategy
LEGAL & GENERAL SAVINGS. 63 ASSET GATHERER STRATEGY. High scale assets High quality earnings Attractive margins and capital light Flows Digital platforms Operational leverage Strong asset growth Flows Legal & General Group Vertical integration Good value for customers
Slide 64: Thank You. Questions and Answers
LEGAL & GENERAL SAVINGS. 64 THANK YOU. QUESTIONS AND ANSWERS EVERY DAY MATTERS