Legal & General Group Plc · LSE:LGEN
Legal & General — Berenberg Demographics Conference 2017
28 slides from Legal & General's conference presentation, Jan 18, 2017
Slide 1: Nigel Wilson, Berenberg Demographics Conference
Nigel Wilson 18th January 2017 Berenberg Demographics Conference
Slide 2: Our vision and equity narrative
Our vision and equity narrative • • • • • •
Slide 3: Macro and demographic customer trends
Macro and demographic customer trends • • • • • •
Slide 4: Money, money everywhere, nor any drop to drink
“Money, money everywhere, nor any drop to drink” • • • •
Slide 5: What are the right growth assets in a world of zeros?
What are the right growth assets in a world of zeros? Downside Analogue Economy Digital Economy Paper Money Digital Money % change % change Economic growth Productivity Nominal interest rates Real interest rates Inflation - Normal - Hyper Wages - Nominal - Real - Hyper Currency
Slide 6: UK ageing population: older people should be encouraged to work longer
UK ageing population: older people should be encouraged to work longer UK population rise for ages 65+ and 80+ 35,000,000 65+ 80+ 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - 2014 2024 2034 2044 2054 2064 2074 2084 2094 2104 2114 •
Slide 7: Why are we not accurately predicting key trends?
Why are we not “accurately” predicting key trends? Increase in Life Expectancy at Age 65 14 12 12 • 10 • 8 • Years 6 • 4 2 1 0? 0 1840-1970 1970-2010 2010-2030 •
Slide 8: Legal & General's increasing role in an ageing society
Legal & General’s increasing role in an ageing society Working age Retirement Saving and insurance Income for retirement Housing wealth
Slide 9: Pensioner poverty has declined – but where next?
Pensioner poverty has declined – but where next?
Slide 10: Pensioner incomes have grown faster than working age incomes since 2002
Pensioner incomes have grown faster than working age incomes since 2002
Slide 11: Who pays for pensions?
Who pays for pensions? Can we deliver tremendous growth in GDP that is required to pay for pensions? 1.6 1600 Government Pension Liability 1,493 1.4 1400 180.7 28.9 1.2 1200 145.2 154.6 1 1000 961 214.8 0.8 800 0.6 600 452.2 0.4 400 200 0.2 316.9 0 2011 2015
Slide 12: Beveridge 2.0 does not exist
Beveridge 2.0 does not exist. We have no solution to Long Term Care, Healthcare & Welfare 35 30 25 20 15 10 5 0 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101+
Slide 13: Personal balance sheet at retirement: more people are half millionaires
Personal balance sheet at retirement: more people are “half millionaires” ASSETS (£’000) Housing equity 190 State pension, £155pw index-linked 200 Pension savings, DB £50k, DC £30k 80 Lifetime value of bus pass, rail card, TV Licence, winter fuel, Xmas bonus, prescriptions 15 Savings 20 TOTAL c.505
Slide 14: Typical cost of retirement
Typical cost of retirement £13,599 65 83.8 Basic cost of living in Current state retirement Current UK life retirement per annum1 age (male) expectancy2 18.8 years Post retirement life expectancy £250,000 £117,000 Cost of care3 Basic cost of retirement £367,000 Typical cost of retirement
Slide 15: DC pensions: structural solution but where are the real assets?
DC pensions: structural solution but where are the real assets? UK Corporate DC savings industry projections US DC AUM 2005 2015 2020 2025 2030 2011 2015 LGIM UK DC AUM • £50bn • • • £24bn • 2011 H1 2016
Slide 16: Are we providing enough access to investment for our customers?
Are we providing enough access to investment for our customers? Technology: the second machine age, issues for investors Globally Digital supers Student start-up Low growth, non-digital Adult scale-up industries Apple ($615bn), Alibaba 2nd stage acquirer Europe lacks ($264bn) YouTube, digital supers
Slide 17: Shortage of long term patient capital is an issue
Shortage of long term patient capital is an issue Equity is currently underused in the UK • • — — — — — — — L&G response: Encourage long terms investing / Stop quarterly reporting
Slide 18: The UK VC market is too small?
The UK VC market is too small? Investment opportunity: growing start-ups into scale-ups Startups (<2yrs old) as a proportion of all firms % of startups growing to 10+ employees in 3 yrs 30 8 25 7 6 20 5 15 4 3 10 2 5 1 0 0 FRA UK LUX NLD AUT USA SWE CAN BEL NOR ITA FIN NOR LUX BEL USA CAN SWE FIN FR
Slide 19: Lifetime Mortgage market is growing fast and could grow faster
Lifetime Mortgage market is growing fast and could grow faster • Lifetime Mortgage Market Forecast 6,000 • 5,000 • 4,000 £m 3,000 L&G response: Entered LTM market in 2015 2,000 £620m 1,000 0 £201m 2014 2015 2016 2017 2018 2019 2020 2015 2016F
Slide 20: Later life lending: drivers for growth
Later life lending: drivers for growth L&G response: Signed agreements with number of banks
Slide 21: Negative equity a remote risk for low LTV Lifetime mortgages
Negative equity a remote risk for low LTV Lifetime mortgages Typical Lifetime mortgage: 28% LTV for 70 year old and 3.99% fixed for life interest 1,300 1,200 House Value: 4% inflation 1,100 House Value: 2% deflation 1,000 Loan amount 900 800 700 600 500 400 300 200 100 - 70 72 74 76 78 80 82 84 86 8
Slide 22: Shortage of suitable retirement housing in the mid-market
Shortage of suitable retirement housing in the mid-market Particularly stark shortage of purpose built accommodation for mid-wealthy older people falling outside state-funded support L&G response: Largest precision built modular housing factory in the world
Slide 23: Moving from Monetary Methadone to Supercharging infrastructure
Moving from “Monetary Methadone” to “Supercharging infrastructure” • • • • •
Slide 24: Long term direct investments
Long term direct investments
Slide 25: Transparent, positive, constructive collaboration between all interested parties
Transparent, positive, constructive collaboration between all interested parties – “holistic” not “political” solutions • • • • • •
Slide 26: Legal & General: a winning proposition
Legal & General: a winning proposition
Slide 27: Consistently delivering strong results
Consistently delivering strong results EPS (p) 11% Net cash generation (£m) 10% CAGR FY11-15 CAGR FY11-15 FY16* FY16* 21.80 1,256 1,360 18.58 1,104 1,002 16.70 15.20 846 865 13.84 727 12.42 11.20 2011 2012 2013 2014 2015 H1 2016 2011 2012 2013 2014 2015 H1 2016 DPS (p) 20% Return on equity (%) CAGR
Slide 28: Nigel Wilson
Nigel Wilson 18th January 2017 LEGAL & GENERAL GROUP PLC | HALF-YEAR RESULTS | AUGUST 2016
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