Legal & General Group Plc · LSE:LGEN
Legal & General — Morgan Stanley European Financial Conference 2013
22 slides from Legal & General's conference presentation, Mar 19, 2013
Slide 1: Stepping Up. Every Day Matters
STEPPING UP. LEGAL & GENERAL EVERY DAY Morgan Stanley Conference 19 MARCH 2013 MATTERS
Slide 2: Forward Looking Statements
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 statements involve uncerta
Slide 3: Accelerating Growth
3 ACCELERATING GROWTH. • Our drivers of growth are long term economic and demographic changes. • We are evolving our simple business model from cash to cash plus organic growth to cash plus organic growth plus acquisitions. • We have no burning platforms and limited sensitivity to low interest rates
Slide 4: 5 Macro Trends. 5 Corporate Responses
4 5 MACRO TRENDS. 5 CORPORATE RESPONSES. Homogenous asset markets LGIM International Ageing populations Retirement Solutions ‘On the Go’ lifestyles Digital Solutions Welfare Reforms Protection Retrenching banks Direct investments
Slide 5: Strategic and Financial Evolution
5 STRATEGIC AND FINANCIAL EVOLUTION. 2009 2012 2013 and beyond CASH: CERTAINTY AND CASH PLUS ORGANIC GROWTH SUSTAINABILITY CASH PLUS ORGANIC GROWTH PLUS BOLT-ON ACQUISITONS • LGIM expansion into US, Gulf, Asia • Triangle of austerity creating • Substantial improvement in MI opportunities for growth
Slide 6: Results Summary: Financial Highlights
6 RESULTS SUMMARY: FINANCIAL HIGHLIGHTS. 1. Earnings per share up 12% to 13.90p (2011: 12.42p) 2. Full year dividend up 20% to 7.65p per share (2011: 6.40p) 3. Operating profit up to £1,087m (2011: £1,053m) Operating profit from divisions up to £1,115m (2011: £1,058m) 4. Profit after tax up to £801m
Slide 7: Results Summary: Accelerating Growth
7 RESULTS SUMMARY: ACCELERATING GROWTH. GROWING FLOWS GROWING STOCKS LGIM net flows up to £7.1bn (2011: £3.0bn) AUM up 9% to £406bn Individual Annuity sales up 26% to £132m AUM up 13% to £32bn Savings sales up 15% to £1.5bn AUA up 8% to £70bn UK Protection sales up 25% to £221m GWP up 6% to £1.3bn U
Slide 8: Cash: High Quality and Certainty
8 CASH: HIGH QUALITY AND CERTAINTY. 2013 2012 2011 £m GUIDANCE OP CASH STRAIN NET CASH OP CASH STRAIN NET CASH Annuities 243 14 257 227 35 262 Protection c.620 240 (45) 195 232 (66) 166 Insured savings 108 (62) 46 101 (63) 38 SUB TOTAL 591 498 560 466 With-profits c.55 52 52 51 51 US Protection 40 4
Slide 9: Dividend 89% of Cash to Group
9 DIVIDEND 89% OF CASH TO GROUP. 2012 2011 NET CASH DIVIDEND DIVIDEND NET CASH DIVIDEND DIVIDEND £m (£m) £m % OF CASH (£m) £m % OF CASH Annuities 257 262 Protection 234 539 89 205 516 89 Savings 117 111 Investment management 197 175 89 189 150 79 US Protection 40 40 100 35 35 100 Divisions 845 754 8
Slide 10: The 'Triangle of Austerity'
10 THE ‘TRIANGLE OF AUSTERITY’. CREATES OPPORTUNITIES The ‘Triangle of Austerity’ is caused by: FISCAL AUSTERITY • Fiscal austerity: government finances under pressure • Banking austerity: deleveraging reduces lending • Regulatory austerity: policy forces ‘risk off’ We are well positioned because: •
Slide 11: UK Needs Effective Growth Policies
11 UK NEEDS EFFECTIVE GROWTH POLICIES. WE CAN PLAY A KEY ROLE IN ECONOMIC AND SOCIAL DEVELOPMENT DECLINING PERMANENT DWELLINGS STRATEGIC SUMMARY 450,000 400,000 • Housing: under supplied 350,000 and over priced 300,000 • Shortage of dwellings, 250,000 rather than mortgages 200,000 150,000 • Finance
Slide 12: 1. LGIM International Expansion
12 1. LGIM INTERNATIONAL EXPANSION. TOTAL AUM £406bn £354bn STRATEGIC SUMMARY Product and geographic expansion: £205bn • US: Adding index to liability driven £111bn Investments (LDI) and active fixed, expand corporate de-risking, 2012 £36bn AUM $33bn 1995 2000 2005 2010 2012 • Gulf: Adding active fi
Slide 13: 2. Retirement Solutions
13 2. RETIREMENT SOLUTIONS. ANNUITIES AUM £32bn STRATEGIC SUMMARY £17bn Product and geographic expansion: • UK: Expand enhanced annuities • Europe: Lead with Bulk Annuity capabilities 2006 2012 • US: Lead with Bulk Annuities, research individual businesses LDI AUM £64bn • Thought leadership in longe
Slide 14: 3. Digital Solutions
14 3. DIGITAL SOLUTIONS. PROJECTED UK PLATFORM GROWTH STRATEGIC SUMMARY 600 • Industrial processes drive efficient scalable models Optimistic 500 24% CAGR £626bn • Platforms gaining economic scale from Workplace and post RDR 400 15% CAGR Realistic distribution £429bn Assets £bn • Online tools suppor
Slide 15: 4. Protection Market Leadership
15 4. PROTECTION MARKET LEADERSHIP. UK GROSS PREMIUMS £1,268m STRATEGIC SUMMARY £782m • UK: Increased digital engagement, expand link with housing £291m • Europe: Expand footprint building both Retail Protection and Group Protection 2001 2005 2012 Group Protection Retail Protection • US: Expand dist
Slide 16: 5. Direct Investments
16 5. DIRECT INVESTMENTS. Sale and Leasebacks Income Partnerships • Joint venture with Imperial • National Football Centre, St College George’s Park at Burton-on- • £116m student Trent accommodation project in Clapham, London • University of Greenwich • Tesco distribution hub at student accommodatio
Slide 17: Businesses We're Not Big In: But Should Be
17 BUSINESSES WE’RE NOT BIG IN: BUT SHOULD BE. BUSINESS AREA LOGIC ACTION OUTCOME International • Global homogenous customer • Launch in US in 2013 Passive Equity market • Asia in 2013 • Regulatory approval received from • Accelerate growth in the US in 2012, Asia planned for 2013 Gulf and Asia Digi
Slide 18: Insurers' Higher Dividend Yield
18 INSURERS’ HIGHER DIVIDEND YIELD. Prudential: Dividend per share Aviva: Dividend per share 35.0 33.0 29.2 35 33.0 30.0 30.0 25.0 * 25.2 23.9 30 27.3 25.5 26.0 24.2 25.4 25.0 19.9 24.0 25 23.0 18.0 18.9 17.1 19.0 20.0 pence 15.4 * 15.8 16.3 20 pence 15.0 15 10.0 10 5.0 5 0.0 0 2002 2003 2004 2005 2
Slide 19: Consensus Dividend Expectations
19 CONSENSUS DIVIDEND EXPECTATIONS. Legal & General Dividend Consensus 9.10p 8.94p 8.33p Prospective dividend yields: pence 7.48p L&G1: 4.8% 6.52p FTSE 100: 3.9% Dow Jones: 2.6% S&P 500: 2.2% 5.23p 1. Based on 173.2 pence share price and consensus dividend of 8.33 pence.
Slide 20: Investment Discipline
20 INVESTMENT DISCIPLINE. “We seek economically attractive global opportunities, where we have management expertise, subject to statutory capital affordability.” Extensive LGIM LGIM: 6 economists, 20 person strategic risk team, plus a resources large pool of investment analysts FORWARD External Inpu
Slide 21: Share Price and Dividend Performance
21 SHARE PRICE AND DIVIDEND PERFORMANCE. 9.10p 8.33p SUMMARY 7.65p 6.40p • Macro trends create opportunities for growth 4.75p 4.06p 3.84p • 5 strategic responses: LGIM International Retirement Solutions 2.01 1.66 1.96 Digital Solutions 1.11 1.33 Protection 2008 2009 2010 2011 2012 2013 Analyst conse
Slide 22: Appendix. 2012 Strong Results: Few Surprises
APPENDIX. 22 2012 STRONG RESULTS: FEW SURPRISES. Investment IFRS gains and IFRS profit/ Operational New Changes in losses, profit/ Tax (loss) cash business Net cash Experience valuation Non-cash international (loss) expense/ before All in £m generation strain generation variances assumptions items a
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