Legal & General Group Plc · LSE:LGEN
Legal & General — FY2015 Earnings Presentation
49 slides from Legal & General's earnings presentation, Mar 15, 2016
Slide 1: Year end results 2015 – Investing for the long term
2015 Legal & General Group plc Year end results – 15 March 2016 INVESTING for the LONG TERM
Slide 2: Forward looking statements
Forward looking statements LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 3: Preliminary Results
Preliminary Results £1,455m +14% 2015 +19% 13.40p Nigel Wilson Group Chief Executive +11% 18.58p LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 4: Financial highlights: continuing strong financial performance
NIGEL WILSON: GROUP CHIEF EXECUTIVE Financial highlights: continuing strong financial performance Net cash generation Operational cash generation Operating profit £1,256m £1,217m £1,455m Earnings per share1 IFRS return on equity2 Full year dividend 18.58p 17.7% 13.40p LEGAL & GENERAL GROUP PLC | YEA
Slide 5: Clear and consistent strategy: excellent execution
NIGEL WILSON: GROUP CHIEF EXECUTIVE Clear and consistent strategy: excellent execution GROWTH DRIVERS 2015 ACHIEVEMENTS AGEING • POPULATIONS • • GLOBALISATION • OF ASSET MARKETS • • • • CREATING REAL • ASSETS • • • WELFARE • REFORMS • • DIGITAL • • • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS |
Slide 6: Consistently delivering strong results
NIGEL WILSON: GROUP CHIEF EXECUTIVE Consistently delivering strong results GROWING NET CASH GENERATION (£m) 10% CONSISTENT EARNINGS PER SHARE GROWTH1 (p) 11% CAGR CAGR 1,256 18.58 1,104 16.70 1,002 15.20 846 865 13.84 12.42 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 INCREASING DIVIDEND PER SH
Slide 7: Balance sheet remains strong
NIGEL WILSON: GROUP CHIEF EXECUTIVE Balance sheet remains strong Economic capital surplus £7.6bn and Solvency II capital surplus £5.5bn Economic 2015 (£bn) Solvency II Capital 13.5 13.5 (5.9) (8.0) 7.6 5.5 • • • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 8: Solvency II
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Solvency II £5.5bn Mark Gregory Group Chief Financial Officer 169% £11.3bn LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 9: Capital position remains strong
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Capital position remains strong CAPITAL POSITION AS AT 31 DECEMBER 2015 • 230% coverage 169% coverage £14bn • £12bn £7.6bn £5.5bn • £10bn • £8bn £8.0bn £6bn £5.9bn £4bn £2bn £0bn Economic Capital Solvency II LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | M
Slide 10: Solvency Capital Requirement analysis
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Solvency Capital Requirement analysis SOLVENCY CAPITAL REQUIREMENT AS AT 31 DECEMBER 2015 £8.0bn LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 11: High quality capital resources
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER High quality capital resources 31 December 2015 (£bn) Solvency II • 11.3 • 0.6 2.0 (0.4) 13.5 8.0 5.5 169 LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 12: Sensitivity analysis & preferred coverage ratio – Solvency II
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Sensitivity analysis & preferred coverage ratio – Solvency II FY 2015 Solvency II Capital Coverage Ratio 169 Credit Spreads widen by 100bps (flat) 168 Credit Spreads narrow by 100bps (flat) 170 Credit Spreads widen by 100bps (stepped) 161 Credit Spreads na
Slide 13: Group Solvency II surplus emergence
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Group Solvency II surplus emergence £bn 1.5 0 2016 2017 2018 2019 2020 -0.5 2016 2017 2018 2019 2020 • • • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 14: Economic Capital surplus of £7.6bn
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Economic Capital surplus of £7.6bn Ratio 229% 230% £9.0bn 0.3 0.8 0.1 (0.7) 7.6 £7.0bn 0.1 7.0 £5.0bn £3.0bn YE 2014 Dividends Operating experience Operating experience Sub-debt redeemed Other capital YE 2015 Economic Capital new business release movements
Slide 15: Reconciliation of Economic Capital to Solvency II
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Reconciliation of Economic Capital to Solvency II Ratio 230% 169% £10.0bn £8.0bn (1.4) 7.6 0.0 (0.3) (0.5) £6.0bn 0.1 £4.0bn 5.5 £2.0bn £0.0bn YE 2015 Different Risk margin vs Longevity Eligibility of own LGA on a D&A YE 2015 Economic Capital matching reca
Slide 16: 2015 Financial Highlights
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER 2015 Financial £1,256m +14% Highlights +10% £1,094m Mark Gregory Group Chief Financial Officer 17.7% LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 17: Consistent delivery: strong results
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Consistent delivery: strong results 2015 2014 YOY (%) 746.1 693.7 8 Assets & 43.4 6,967 44.2 5,703 (2) 22 Premiums 1,779 1,784 - 108.3 108.7 - 1,217 1,101 11 Cash & 1,256 1,455 1,104 1,275 14 14 Earnings 1,355 1,238 9 18.58 16.70 11 5.5 N/a 169 N/a Capital
Slide 18: Driving growth: increasing stock
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Driving growth: increasing stock LGIM AUM GROWTH 11% L&G RETIREMENT ASSETS GROWTH 10% CAGR CAGR £746bn £43.4bn £543bn £32.2bn 2012 2013 2014 2015 2012 2013 2014 2015 INSURANCE PREMIUMS GROWTH 8% SAVINGS ASSETS GROWTH 31% CAGR CAGR £3.1bn £108bn Cofunds £2.
Slide 19: Net cash: diversified growth
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Net cash: diversified growth NET CASH GENERATION MOVEMENT • £1,256m • • • £1,104m • • 2014 LGR LGIM LGC Insurance LGA Savings Group debt 2015 • & other costs LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 20: LGR: Evolving strategy delivering strong profit growth
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER LGR: Evolving strategy delivering strong profit growth • FINANCIAL HIGHLIGHTS 2015 2014 • 372 292 45 51 • 417 343 639 428 43.4 44.2 • 2,744 6,578 MATURE ASSETS 9.8 9.3 MATURE ASSETS 201 n/a • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 21: LGIM: Successfully executing our strategy
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER LGIM: Successfully executing our strategy FINANCIAL HIGHLIGHTS 2015 2014 • 694 645 • (335) (309) 359 336 • (4) (15) 355 321 • 281 246 48 48 62.2 39.2 • 37.7 7.5 • 9.5 8.7 92 89 • ASSET SCALE 2015 2014 746.1 693.7 • 122.4 114.0 • 46.1 40.7 14.7 11.1 10.5 14
Slide 22: LGC: Asset origination with our capital
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER LGC: Asset origination with our capital FINANCIAL HIGHLIGHTS 2015 2014 • 187 162 • 233 203 2.8 4.0 • 4.2 3.9 867 700 • MATURE ASSETS ASSET ORIGINATION INVESTMENT PORTFOLIO LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 23: Insurance: Strong new business volumes driving cash growth
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Insurance: Strong new business volumes driving cash growth FINANCIAL HIGHLIGHTS 2015 2014 • INSURANCE 323 332 348 327 • 293 370 UK PROTECTION • 1,442 1,407 9.9 8.4 GENERAL INSURANCE • 89 87 xxx% • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 24: Savings: Careful management of Mature Savings book
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Savings: Careful management of Mature Savings book, assets maintained through platform business growth UK SAVINGS FINANCIAL HIGHLIGHTS 2015 2014 • 119 127 • (9) (14) MATURE ASSETS 110 113 PLATFORMS* 99 105 • 108.3 108.7 • • LEGAL & GENERAL GROUP PLC | YEAR
Slide 25: LGA: Increased contribution to cash and profits
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER LGA: Increased contribution to cash and profits FINANCIAL HIGHLIGHTS 2015 2014 • • 83 76 • 125 93 • 12.1 9.9 • 1,183 1,117 1,208 1,150 • L&G AMERICA DIVIDEND 10% CAGR FY12-15 $91m $83m $63m 2012 2013 2014 2015 2016 F* LEGAL & GENERAL GROUP PLC | YEAR END R
Slide 26: Consistent focus on cash generation
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Consistent focus on cash generation £m 2015 GUIDANCE 2015 OPERATIONAL 2016 GUIDANCE CASH Legal & General Retirement 340 372 Insurance excluding General Insurance 290 282 Savings 135 119 Legal & General America 50 54 Legal & General Capital 170 187 SUB TOTA
Slide 27: Full year dividend up 19% to 13.40p
MARK GREGORY: GROUP CHIEF FINANCIAL OFFICER Full year dividend up 19% to 13.40p DIVIDEND 20% CAGR 13.40p 11.25p 9.30p 7.65p 6.40p 8.35p 9.95p 5.69p 6.90p 4.74p 1.66p 1.96p 2.40p 2.90p 3.45p Column3 Column2 2011 2012 2013 2014 2015 NET CASH (£m) 846 865 1,002 1,104 1,256 DIVIDEND (£m) 375 452 550 668
Slide 28: 2015 and beyond
2015 and beyond Nigel Wilson Group Chief Executive LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 29: Our strategy continues to evolve, our results continue to improve
NIGEL WILSON: GROUP CHIEF EXECUTIVE Our strategy continues to evolve, our results continue to improve PHASE 1: • 2008 - 2011 PHASE 2: • 2011 - 2015 • • • PHASE 3: • 2015 - 2025 • • • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 30: High performing businesses aligned to growth drivers
NIGEL WILSON: GROUP CHIEF EXECUTIVE High performing businesses aligned to growth drivers ASSET MANAGEMENT INSURANCE Operating Profit (£m) 2015 2014 Operating Profit (£m) 2015 2014 Insurance Legal & General Investment • 293 370 Management 355 321 • • • Legal & General Retirement Legal & General Ameri
Slide 31: De-cluttering and simplifying our business
NIGEL WILSON: GROUP CHIEF EXECUTIVE De-cluttering and simplifying our business LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 32: LGR: Nine sources of profit
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGR: Nine sources of profit • 1 BACK BOOK FOR CASH • UK CAPITAL-LITE FRONT • 2 BOOK • EUROPEAN PENSION RISK 3 TRANSFER • • US PENSION RISK 4 TRANSFER • • LONGEVITY INSURANCE • 5 • 6 LIFETIME MORTGAGES • • INDIVIDUAL RETIREMENT • 7 SOLUTIONS SECONDARY ANNUITY • 8 M
Slide 33: LGR: Our capital-lite strategy
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGR: Our capital-lite strategy BUILDING OUR BUSINESS LONGEVITY EXPOSURE AS AT 31 DECEMBER 2015 ANSWERING CLIENT NEEDS UK USA Netherlands DEPLOYING OUR SKILL SET Brand Strength • • • GLOBAL CAPITAL • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 34: LGR: The asset story
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGR: The asset story SECTORAL AND RATING ANALYSIS AS AT 31 DECEMBER 2015 • • Credit Rating Externally rated Internally rated Total £bn £bn £bn • • • A and BB or Sectoral split BBB Total above below £bn £bn £bn £bn • • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS
Slide 35: LGIM: Growing our business across all markets
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGIM: Growing our business across all markets Comprehensive • solutions for UK DB • clients • DC capabilities and • Workplace Pension • • Grow LGIM • International • Grow Retail and • Wealth businesses • • Internal capabilities • and services • LEGAL & GENERAL GRO
Slide 36: LGIM: Our business is increasingly diversified as we successfully expand
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGIM: Our business is increasingly diversified as we successfully expand PRODUCT AREA (AUM) CLIENT SEGMENT (AUM) 14% REGION (AUM) CAGR £746bn1 £746bn1 £746bn1 £204bn £204bn £204bn 2005 2010 2015 2005 2010 2015 2005 2010 2015 • • • LEGAL & GENERAL GROUP PLC | YEAR
Slide 37: LGIM: Growth in UK market achieved on multiple fronts
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGIM: Growth in UK market achieved on multiple fronts Solutions AUM Fixed Income AUM1 Real Assets AUM2 £106.8bn £18.3bn £338.2bn £72.4bn £169.4bn £8.8bn 2011 2015 2011 2015 2011 2015 Retail AUM DC AUM Workplace Customers £19.9bn £46.1bn 1751k £14.4bn £23.6bn 270k
Slide 38: LGIM: Increasing global footprint
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGIM: Increasing global footprint INTERNATIONAL AUM GROWTH 43% • CAGR* 147 • £122.4bn £37.5bn • £76.4bn 20 • £31.5bn 2011 2012 2013 2014 2015 • INTERNATIONAL NET FLOWS • • £9.5bn £4.5bn 2011 2012 2013 2014 2015 LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH
Slide 39: LGC: High quality, sustainable earnings through asset creation
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGC: High quality, sustainable earnings through asset creation Urban regeneration Housing • • • • • • Alternative finance Clean energy • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 40: LGC: Sector focus where large funding gap exists
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGC: Sector focus where large funding gap exists Sector Opportunity LGC Gross Investment Development (£m) Value (£m) UK • REGENERATION • UK HOUSING • • CLEAN ENERGY • • ALTERNATIVE • FINANCE LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 41: LGC: Multiple drivers of value to the Group beyond LGC’s NAV
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGC: Multiple drivers of value to the Group beyond LGC’s NAV Legal & General Capital Principal Investor Asset creation Legal & General Retirement LGIM Real Assets Direct Investor Asset Management Creating matching assets for long- Expertise and management of third
Slide 42: Insurance: L&G Direct shows continued growth
NIGEL WILSON: GROUP CHIEF EXECUTIVE Insurance: L&G Direct shows continued growth HOUSEHOLD / ASU GWP 30% • CAGR £101m • £35m • 2011 2012 2013 2014 2015 PROTECTION NEW BUSINESS APE 21% CAGR • £29m £13m 2011 2012 2013 2014 2015 CUSTOMERS 26% CAGR 1.1m • 0.5m • 2012 2013 2014 2015 LEGAL & GENERAL GROUP
Slide 43: Insurance: Developing the Insurance strategy
NIGEL WILSON: GROUP CHIEF EXECUTIVE Insurance: Developing the Insurance strategy • • • • • • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 44: Insurance: Internationalising Insurance
NIGEL WILSON, GROUP CHIEF EXECUTIVE Insurance: Internationalising Insurance CORE PROTECTION STRENGTHS • • • • • • • LEVERAGE CAPABILITY WORLDWIDE • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 45: Savings: Opportunities to add value to the Group
NIGEL WILSON: GROUP CHIEF EXECUTIVE Savings: Opportunities to add value to the Group OPPORTUNITY OUTCOME * SIMPLIFY OPERATIONS & ENHANCE DIGITAL SOLUTIONS 2013 2015 £102bn “GROW” FUNDS £42bn 2012 2013 2014 2015 LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 46: LGA: Synergies accelerating growth across multiple divisions
NIGEL WILSON: GROUP CHIEF EXECUTIVE LGA: Synergies accelerating growth across multiple divisions L&G AMERICA GWP 16% CAGR Protection PRT $1,628m $778m 2010 2011 2012 2013 2014 2015 • • • • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 47: One firm, one set of values, one set of behaviours
NIGEL WILSON: GROUP CHIEF EXECUTIVE One firm, one set of values, one set of behaviours • PURPOSE • • BEHAVIOURS • • • BUSINESS • PRINCIPLES • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 48: A world full of opportunities 2015-2025
NIGEL WILSON: GROUP CHIEF EXECUTIVE A world full of opportunities 2015-2025 GROWTH DRIVERS 2025 AMBITION AGEING • POPULATIONS • GLOBALISATION • OF ASSET • MARKETS CREATING REAL • ASSETS • WELFARE • REFORMS • DIGITAL • • LEGAL & GENERAL GROUP PLC | YEAR END RESULTS | MARCH 2016
Slide 49: Investing for the long term
INVESTING for the LONG TERM