REG - Legal & General Grp - L&G Full Year Results 2023 Part 1
06/03/2024 07:00
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RNS Number : 7190F Legal & General Group Plc 06 March 2024
Full Year 2023 Results
Set to achieve our 5 year ambitions, with record new business volumes and resilient in-year profit generation
António Simões, CEO
"Everything I have seen since joining the business in January has confirmed what attracted me to Legal & General. We have an authentic sense of purpose and stand out for our market-leading businesses, performance track record and strong balance sheet, delivered by talented colleagues.
Our 2023 performance reflects these strengths. We are on course to achieve our five-year targets, and demonstrated resilience in challenging markets to achieve record new business volumes in pension risk transfer, UK annuities and US protection, increasing our store of future profit. Our international assets under management and alternative assets portfolio continue to grow, as does our position in the UK defined contribution pensions market.
We must be as ambitious for Legal & General's future as we are proud of our history. This is the right moment to take a fresh perspective, build on our track record and set out a vision for profitable and sustainable growth. I look forward to outlining our strategy and plans at our Capital Markets Event on 12 June."
Resilient financial performance(1)
· Operating profit of £1,667m (2022: £1,663m)
· Profit after tax(2) of £457m (2022: £783m)
· Solvency II capital generation of £1.8bn (2022: £1.8bn)
· Solvency II coverage ratio(3) of 224%, with surplus of £9.2bn (2022:
236%, £9.9bn)
· Dividend per share of 20.34p, up 5% (2022: 19.37p)
Growth in our store of future profit: up 9% to £14.7bn(4)
· Record volumes across our insurance businesses:
‒ £13.7bn of institutional annuities (£10.5bn retained premium(5))
‒ £1.4bn of individual annuities
‒ $175m of US protection new business premium
· New business CSM contributed £1.2bn (2022: £0.9bn)
· CSM has grown 9% to £13.0bn (2022: £11.9bn)
Set to achieve our five-year (2020-2024) ambitions
· Cumulative Solvency II capital generation of £6.8bn (£8-9bn by
2024)
· Cumulative dividends declared of £4.5bn (£5.6-5.9bn by 2024)
· Cumulative net surplus generation over dividends of £0.8bn
· The Board's intention is to grow the dividend at 5% for the year
FY24(6), as previously communicated
1. The Group uses a number of Alternative Performance Measures (including
adjusted operating profit) to enhance understanding of the Group's
performance. These are defined in the glossary, on pages 83 to 83 of this
report. IFRS 17 was introduced on 1st January 2023, comparatives have been
restated accordingly.
2. Profit after tax attributable to equity holders.
3. Solvency II coverage ratio before the payment of 2023 final dividend.
4. Store of future profit refers to the gross of tax combination of
established Contractual Service Margin "CSM" and Risk Adjustment "RA" (net of
reinsurance) under IFRS 17.
5. Net premium after deducting for funded reinsurance relating to 2023 PRT
transactions.
6. Absent market shocks / events outside of our control.
Financial summary(1)
£m 2023 2022 Growth (%)
Analysis of operating profit
Legal & General Retirement Institutional (LGRI) 886 807 10
Retail 408 415 (2)
Legal & General Capital (LGC) 510 509 -
Legal & General Investment Management (LGIM) 274 340 (19)
Operating profit from divisions 2,078 2,071 -
Group debt costs (212) (214) 1
Group investment projects and expenses (199) (194) (3)
Operating profit 1,667 1,663 -
Investment and other variances (incl. minority interests) (1,591) (795) (100)
Investment variance excluding longevity and internal pension scheme (1,106) (628) (76)
accounting(2)
Profit before tax attributable to equity holders 76 868 (91)
Profit before tax excluding longevity and internal pension scheme accounting 561 1,035 (46)
Profit after tax attributable to equity holders 457 783 (42)
Profit after tax excluding longevity and internal pension scheme accounting 848 927 (9)
Earnings per share (p) 7.35 12.84 (43)
Earnings per share (p) excluding longevity and internal pension scheme 13.96 15.28 (9)
accounting
12,994 11,938 9
Contractual Service Margin (CSM)
CSM (net of tax) + Book Value 14,720 14,589 1
CSM (net of tax) + Book value per share (p) 246 244 1
Solvency II
Operational surplus generation 1,821 1,805 1
Coverage ratio (%) 224 236 (12)
Full year dividend per share (p) 20.34 19.37 5
1. IFRS 17 was introduced on 1 January 2023, comparatives have been restated
accordingly. For further information please see Note 1.01
2. Excludes the accounting impacts of a longevity assumption change (see
page 6 and 8) and the buyout of the L&G pension scheme (see note
3.14.iii).
2023 Financial performance
Income statement
2023 operating performance was resilient, with operating profit from divisions
of £2,078m (2022: £2,071m). Our business remains well-positioned to
execute on compelling structural market opportunities to deliver further
profitable growth over the medium and long-term.
LGRI operating profit increased by 10% to £886m (2022: £807m) underpinned by
the growing scale of back-book earnings and the consistent investment
performance of our annuity portfolio. LGRI executed record new business
volumes, addressing growing demand while maintaining pricing discipline,
writing £13,719m of global PRT (2022: £9,541m) at a Solvency II new business
margin of 7.4% 1 (#_ftn1) in line with our long-term expectation. This has
added c£1.0bn to our store of future profit in 2023.
Retail operating profit decreased by 2% to 408m (2022: £415m). Whilst
insurance operating profit was up 22% (2023: £436m, 2022: £357m), driven by
ongoing profit releases in the UK and US, total operating profit was down
given the lower contribution from the Fintech businesses, as valuation uplifts
from 2022 did not repeat.
LGC operating profit was flat against prior year earnings at £510m (2022:
£509m), reflecting a good performance in a challenging macro-economic
environment for alternative assets. In 2023, we grew our third-party managed
capital by 9% to £18.1bn (2022: £16.6bn). We remain on track to meet our
ambition of £25-30bn by 2025.
LGIM delivered operating profit of £274m (2022: £340m), primarily reflecting
the impact of higher interest rates on the value of assets under management:
average assets under management were 12% lower year-on-year. Despite
significant inflationary impacts, we have taken action to keep absolute costs
flat.
Profit before tax attributable to equity holders, excluding longevity and
internal pension scheme accounting, was £561m (2022: £1,035m), reflecting
investment and other variances of £(1,106)m (2022: £(628)m). Investment
variance was driven by the unrealised mark-to-market impact of higher rates on
asset valuations, the cost relating to our announced Modular Homes closure and
the write-down of our investment in Onto.
Balance sheet and asset portfolio
Solvency II operational surplus generation (OSG) was level at £1,821m (2022:
£1,805m). Net surplus generation (NSG) was £1,383m (2022: £1,453m)
reflecting the impact of higher volumes of PRT business with strain levels in
line with our long-term average. The UK annuity portfolio was
self-sustaining again for the 4(th) year in a row, and we continue to have
optionality to further enhance profitability through back-book asset
optimisation.
Solvency II coverage ratio 2 (#_ftn2) is strong at 224% (2022: 236%).
Our IFRS return on equity 3 (#_ftn3) of 9.7% (2022: 15.6%) reflects the
impact of investment and other variances on the total result. Looking at the
result before these variances, return on equity would be 27.1% 4 (#_ftn4)
(2022: 26.9%). We expect investment variance to average to zero over the
longer term.
Our store of future profit increased 9% to £14.7bn (2022: £13.5bn), with CSM
up 9% to £13.0bn (2022: £11.9bn), reflecting contributions from our growing
annuity businesses and the routine longevity review in H2, and by the Risk
Adjustment (£1.7bn) up 11% from 2022 (£1.5bn).
Our diversified, actively managed annuity portfolio has continued to perform
resiliently with no defaults. The annuity portfolio's direct investments have
received 100% of scheduled cash-flows year to date, reflecting the high
quality of our counterparty exposure.
Group Outlook
Confident in achieving our ambitions; well-positioned to deliver long-term
profitable growth
Our strategy has delivered strong compounding returns for our shareholders
over time. It has demonstrated resilience and positions us well to navigate
the prevailing market environment, and to deliver on our current five-year
ambitions.
Cumulatively, over the period 2020-2024, we have an ambition to generate
capital of £8-9bn, with net capital surplus generation (i.e., including new
business strain) to exceed dividends of £5.6-5.9bn. 5 (#_ftn5)
We made further progress against these ambitions in 2023 and are set to
achieve them in 2024. From the start of the ambition period to 2023, we have
achieved £6.8bn of cumulative capital generation while declaring dividends of
£4.5bn. Even with no growth in capital generation in 2024, the cumulative
capital generation would still be comfortably within our stated ambition of
£8-9bn. We have generated cumulative net surplus generation over dividends of
£0.8bn from 2020 to date.
We remain confident in our ability to deliver resilient, organic growth,
supported by our strong competitive positioning in attractive and growing
markets. Our confidence in our dividend paying capacity is underpinned by
the Group's strong earnings and strong balance sheet, which has Solvency II
regulatory capital of £16.6bn: a surplus of £9.2bn in excess of a capital
requirement of £7.4bn.
Business segment outlook
Legal & General Retirement Institutional (LGRI)
LGRI participates actively in the global pension risk transfer (PRT) market,
focusing on corporate defined benefit (DB) pension plans in the UK, the US,
Canada and the Netherlands. Together, these markets have more than £6
trillion of pension liabilities of which c10% have transacted to date. 6
(#_ftn6) The addressable market therefore remains significant.
Our stated ambition for UK PRT is to write circa £8-10bn per annum under
typical market volumes. With up to £355 billion of UK PRT demand over the
next five years anticipated and an increase in £1bn+ size individual
transactions coming to market 7 (#_ftn7) , we are expecting a period of
heightened market volumes. We believe we are well positioned to address this
need and have appetite to write higher volumes where commercial conditions
support. We will continue to be proactive in managing the capital we deploy
on this business, including use of reinsurance, to generate strong margins
over time.
We are also well-positioned to execute internationally, having written over
$7.5bn of PRT in the US and Canada between 2020 and 2023. In 2023, we
announced our strategic relationship with Lifetri which looks to capitalise on
proposed pension reforms in the Netherlands.
Legal & General Retail (Retail)
Our Workplace Savings business administers one of the largest and
fastest-growing UK Master Trusts, which now has £25.4bn of AUM, and was the
first commercial Master Trust to surpass £20bn of assets under management.
It is well positioned to benefit from the trend of consolidation in the
market as well as from contributions from existing schemes. Our focus
remains on improving efficiency and scalability as the business continues to
grow.
We expect demand for retail annuities to remain strong, providing substantial
long-term profits to the Group. In protection, we expect our US business to
continue to build on the technological and distribution advantages that have
delivered record sales in 2023, and in the UK, we see opportunities to further
grow our distribution reach and profitability.
Legal & General Capital (LGC)
In LGC, we continue to focus on delivering financial performance through
responsible and impactful investing whilst increasing our international
diversification. Our unique asset origination capabilities continue to be a
key differentiator for L&G in PRT as we manufacture bespoke investments,
tailored to create attractive long-term returns for the annuity portfolio.
We continue to benefit from our reputation and unique partnerships to access
opportunities across key sectors including Housing, Specialist Commercial Real
Estate, Clean Energy, General Partners Investing and Venture Capital
Platforms. This year, we are looking to invest alongside an increasing
number of third-party capital partners to create long-term income streams,
underpinned by societal demand. LGC will further scale its impact, whilst
securing additional revenue for the Group as a result of third-party
management and advisory fees.
Legal & General Investment Management (LGIM)
LGIM competes in the global asset management market and invests both on behalf
of L&G and for third party clients; the latter contributes around 80% of
global revenues. Asset management is a long-term business, and we remain
confident in our strategy which positions LGIM for sustainable future growth,
supported by industry tailwinds.
Our medium-term ambition is underpinned by the three strategic pillars, to
modernise, diversify and internationalise:
· Modernise: We are evolving the business, investing in our people, platform
and data capabilities to improve operating effectiveness and deliver scale
benefits. This includes transformation of our operating model, using State
Street/Charles River to build a global investment and middle office platform.
· Diversify: We are building on our core capabilities to improve business mix
by selectively adding to our investment offering, with a focus on
higher-margin areas such as private markets, active fixed income and wholesale
distribution channels. We continue to focus on sustainable investing.
· Internationalise: LGIM aims to be an innovator in regions and countries
where our strengths align to client needs and continues to expand globally.
Since 2018, LGIM's International AUM has grown by 81% to £465.4bn,
representing 40% of AUM.
Our approach to capital allocation
The Board believes it has considerable opportunities available to deliver
attractive returns to shareholders by retaining and investing capital within
the Group.
The Board will at the same time continually assess these investment
opportunities against the relative attractiveness of returning capital to
shareholders either through a buyback or a programme of buybacks.
If, at any point, the Board believes that capital would be best deployed in
this way, or if the Board believed it had surplus capital, it would not
hesitate to return capital to shareholders. Any incremental capital
investment could also, over time, increase the likelihood of these returns to
shareholders.
We will provide further detail on our approach to capital allocation and
distribution at the Capital Markets Event on the 12 June, 2024.
Dividend
The Group's dividend policy states: "We are a long-term business and set our
dividend annually, according to agreed principles. The Board's intention for
the future is to maintain its progressive dividend policy, reflecting the
Group's expected medium-term underlying business growth, including measurement
of capital generation and adjusted operating profit."
The Board has recommended a final dividend of 14.63p, giving a full year
dividend of 20.34p, up 5% from the prior year (19.37p). The Board's
intention is to grow the dividend at 5% until FY24.
Legal & General Retirement Institutional
FINANCIAL HIGHLIGHTS(1) £m 2023 2022
Contractual service margin release 591 497
Risk adjustment release 119 136
Expected investment margin 344 280
Experience variances (13) 16
Non-attributable expenses (160) (130)
Other 5 8
Operating profit 886 807
Investment variance from longevity assumption change (249) (131)
Other investment variance (200) (6)
Profit before tax attributable to equity holders 437 670
Contractual service margin (CSM) 8,350 7,448
Risk adjustment (RA) 807 649
Total store of future profit 9,157 8,097
CSM release as a % of closing CSM pre release 6.6% 6.3%
New business CSM 865 613
New business RA 161 80
Total new business future profit 1,026 693
UK PRT 12,048 7,319
International PRT 1,671 2,222
Total new business (Gross Premiums) 13,719 9,541
Funded reinsurance premiums (3,189) (955)
Total new business (net of Funded Reinsurance) 10,530 8,586
Institutional annuity assets(2) (£bn) 68.9 60.1
1. IFRS 17 was introduced on 1 January 2023, comparatives have been restated
accordingly. For further information please see Note 1.01.
2. In the UK, annuity assets across LGRI and Retail are managed together. We
show here LGRI estimated annuity assets. Excludes derivative assets.
LGRI continued to deliver strong operating profit, up 10% to £886m
Contractual Service Margin (CSM) release increased 19% to £591m (2022:
£497m). This reflects the growth in our store of future profit which is
supported by profitable new business written and the routine longevity
review. In 2023, 6.6% of the closing CSM pre-release (£8.9bn) was released
into profit. Overall, the CSM grew 12.1% to £8.4bn (2022: £7.4bn).
Investment related operating profits increased 23% to £344m (2022: £280m).
This increase is driven by higher interest rates increasing the expected
return on surplus assets. In addition, this number also includes asset
optimisation actions which routinely fine-tune our annuity backing asset
portfolio to replace previously sourced assets with newly sourced higher
return investments.
Non-attributable expenses of £(160)m (2022: £(130)m) reflect increasing
investment in operational capacity and resilience to meet heightened global
demand.
Profit before tax of £437m (2022: £670m) was impacted by investment and
other variances of (£(449)m). This is partly driven by the impact of the
longevity assumption change in H2 where the IFRS 17 contractual service margin
is calculated using the locked-in discount rate at inception, whilst the best
estimate liabilities are calculated using the current, higher discount rate.
This effect will unwind in future years as higher CSM releases. The remaining
portion largely relates to the unrealised mark-to-market impact of higher
rates on the surplus assets in our annuity portfolio.
SII & IFRS margins consistent with long-term expectation while adding
£1.0bn of future profit
During 2023, we wrote £13.7bn (£10.5bn net of reinsurance) of global pension
risk transfer (PRT) new business across 43 deals (2022: £9.5bn, 61 deals).
UK gross volumes increased by 65% to £12.0bn (2022: (£7.3bn) and
international volumes were £1.7bn (2022: £2.2bn).
Under IFRS 17, new business profits are now deferred into the CSM and RA on
the balance sheet and recognised in operating profit over the lifetime of the
contract. New business added £1.0bn of future profit to the CSM and RA,
making a strong contribution to the growth of our store of future profit over
2023.
The £12.0bn of UK PRT delivered a 7.4% UK Solvency II new business margin
(2022: 8.9%) in line with our long-term expectation. We continue to be
disciplined in our pricing and deployment of capital. We have successfully
executed transactions over the last few years at initial strain levels below
our 4% target. We actively optimise the back-book in the course of normal
business by matching newly sourced, higher-return assets to back-book
liabilities, resulting in additional margin and profit generation post-sale.
Successful execution in the UK leveraging internal synergies
LGRI's brand, scale and asset origination capabilities - through synergies and
expertise within LGIM and LGC - are critical to our market leadership in the
UK PRT market. Long-term client relationships, typically created and
fostered by LGIM, have allowed us to help many pension plans achieve their
de-risking goals, including the recent £4.8 billion full buy-in with the
Boots Pension Scheme, and the earlier £2.7bn follow-on transaction with the
British Steel Pension Scheme, executed under an umbrella agreement.
Well positioned to execute in international markets
LGRI delivered US PRT new business premiums of $1,882m (2023: £1,463m, 2022:
$2,096m; £1,763m). In H2, we surpassed $10 billion of total written premium
with over 100 deals in the US since our launch in 2015. This includes roughly
$5 billion secured in just the past three years and our largest ever US
transaction in July for $789m USD.
In 2023, we have written c$350m CAD of Canadian liabilities through our
reinsurance entity, L&G Re. This brings L&G Re's total reinsured
premium in the Canadian PRT market to over $1.5bn CAD. We continue to
actively price in the Canadian and Dutch markets and remain disciplined on
price with a focus on long-term profitability and shareholder returns.
Legal & General remains strongly positioned to offer holistic,
multinational pension de-risking solutions, leveraging skills and capabilities
across geographies.
Retail
FINANCIAL HIGHLIGHTS(1) £m 2023 2022
Contractual service margin release 446 424
Risk adjustment release 74 85
Expected investment margin 81 60
Experience variances (44) (99)
Non-attributable expenses (121) (113)
Insurance profit 436 357
Other (Non-insurance profit) (28) 58
Operating profit 408 415
- US/UK Insurance(2) 138 165
- Retail Retirement(3) 270 250
Investment variance from longevity assumption change (69) (36)
Other investment variance (131) 58
Profit before tax attributable to equity holders 208 437
Contractual service margin (CSM) 4,644 4,490
Risk adjustment (RA) 891 883
Total store of future profit 5,535 5,373
New business CSM 320 287
New business RA 32 28
Total new business future profit 352 315
Protection new business annual premiums 412 382
Individual annuities single premium 1,431 954
Workplace Savings net flows(4) (£bn) 6.3 7.3
Lifetime & Retirement Interest Only mortgage advances 299 632
Retail retirement annuity assets(5) (£bn) 17.2 16.5
UK Retail protection gross premiums 1,512 1,485
UK Group protection gross premiums 479 427
US protection gross premiums 1,273 1,222
Total protection gross premiums 3,264 3,134
Protection New Business Value 165 166
Annuities New Business Value 100 60
Solvency II New Business Value 265 226
1. IFRS 17 was introduced on 1 January 2023,
comparatives have been restated accordingly. For further information please
see Note 1.01.
2. UK Insurance includes Retail Protection, Group
Protection, Fintech and Mortgage Services.
3. Retail Retirement includes Individual Annuities,
Lifetime Mortgages, Workplace Admin.
4. This represents the Workplace Savings
administration business. Profits on the fund management services we provide
are included in LGIM's asset management operating profit.
5. In the UK, annuity assets across LGRI and Retail
are managed together. Estimated proportion of annuity assets belonging to
Retail Retirement. Excludes derivative assets.
Operating profit of £408m
In 2023, Retail operating profit was £408m (2022: £415m). Whilst insurance
operating profit of £436m is up 22% (2022: £357m), driven by resilient
on-going profit releases and improved mortality experience in the US, total
operating profit is down given non-repeating gains on Fintech investments in
2022 and macro-driven challenges in mortgage-related businesses (reflected in
"Other" above).
The Contractual Service Margin (CSM) release was £446m (2022: £424m),
reflecting the release of previously stored insurance profits. Growth in the
CSM release was driven by profitable new business written and the routine
longevity review in H2. In 2023, 8.8% of the closing CSM pre-release (£5.1bn)
was released into profit (2022: 8.6%, £4.9bn) and, overall, the CSM grew by
3.4% to £4.6bn (2022: £4.5bn).
Experience variances of £(44)m (2022: £(99)m) relate to less adverse
mortality in the US (for which we fully utilised the $40m provision setup in
2022) and the impact of persistency experience and assumption changes in the
UK protection business that negatively impact onerous contracts. Although
better persistency is a net positive for the portfolio, the benefit on
profitable contracts is deferred and reflected in the change in CSM, whereas
the impact on onerous contacts is recognised in the P&L under IFRS17.
Profit before tax was £208m (2022: £437m), significantly impacted by
investment variances from longevity assumption changes in our annuity
portfolio in H2, and the write-down of our investment in Onto.
Solvency II New Business Value increased 17% to £265m (2022: £226m) with
growth in Retail Annuities and US protection being offset by lower margins in
UK protection, due to higher interest rates and lower new business volumes. We
continue to operate with a focus on disciplined pricing and on maintaining
strong distribution channels.
Succeeding in a competitive landscape in 2023
Retail annuity sales were £1,431m (2022: £954m), a record year, surpassing
£1bn for the first time since Pension Freedoms reform in 2015. Both
Lifetime Annuity and Fixed Term Annuity sales performed well throughout the
year as higher interest rates have made these products more attractive to our
customers.
Lifetime mortgage advances, including Retirement Interest Only mortgages, were
£299m (2022: £632m) reflecting a decline in demand as a result of higher
interest rates. Throughout this period, we have maintained pricing and
underwriting discipline.
Workplace Savings net flows were £6.3bn (2022: £7.3bn), as a result of
continued client wins and increased member contributions. Workplace pension
platform members increased to 5.2 million in 2023.
UK Retail protection gross premium income increased to £1,512m (2022:
£1,485m), with new business annual premiums of £150m (2022: £171m) in what
remained a highly competitive market. L&G continues to be a leader in
this market with a share of 18.4% 8 (#_ftn8) , delivering a point-of-sale
underwriting decision for more than 80% of our customers.
UK Group protection gross premium income increased 12% to £479m (2022:
£427m) as a result of good retention and new business annual premiums of
£121m (2022: £107m). Our online "quote and apply" platform for smaller
schemes continues to perform well, processing c900 new clients over the year
(2022: c600), and we continue to see growth in this part of the market. Group
Protection saw 2,929 income protection scheme members return to work during
the year.
US protection (LGIA) new business annual premiums increased 36% to $175m
(2022: $129m), with robust Solvency II new business margins of 11.4 % (2022:
10.6%). Gross premiums increased 5% to $1,584m (2022: $1,512m). Our
digital new business platform is making it easier for customers and their
advisors to apply and buy our term products, resulting in our best-ever single
year sales volumes in 2023. This is driving up our market share: LGIA ranked
number one in the independent broker channel and third in the overall US term
market in Q3 2023, up from fifth in 2022. 9 (#_ftn9) We expect to drive
further sales growth and to reduce unit costs over the coming years. Over
90% of eligible new business is now submitted through our digital new business
platform.
Legal & General Capital (LGC)
FINANCIAL HIGHLIGHTS £m 2023 2022
Operating profit 510 509
- Alternative asset portfolio 371 400
- Traded investment portfolio & Treasury 139 109
Investment and other variances(1,2) (381) (428)
Profit before tax attributable to equity holders(2) 129 81
ALTERNATIVE ASSET PORTFOLIO £m
Specialist commercial real estate 868 811
Clean energy 374 272
Residential property(2) 2,319 2,248
Alternative Finance 933 811
4,494 4,142
TRADED ASSET PORTFOLIO £m
Equities 964 1,159
Bonds 212 348
Derivative assets 16 34
Cash and loans(3) 1,118 1,145
Total 2,310 2,686
LGC investment portfolio 6,804 6,828
Treasury assets at holding company 1,219 1,588
Total 8,023 8,416
1. Excludes 2023 costs relating to the announced Modular Homes closure.
2. 2022 restated to reflect the impact of the implementation of IFRS 9 on
certain intra-segment assets.
3. Includes short term liquid holdings and loans at FV.
Total operating profit of £510m
LGC operating profit is flat at £510m versus prior year earnings (2022:
£509m). Our alternative asset portfolio contributed £371m of operating
profit (2022: £400m), reflecting a resilient performance in the higher
interest rate environment.
LGC's alternative asset portfolio grew 8.5% to £4.5bn as we deployed £0.6bn
into new and existing investments in the UK and internationally, further
strengthening our capabilities across a diversified range of alternative
assets that are underpinned by structural growth drivers.
Through its investments, LGC originates assets that generate attractive
returns for shareholders, creates Matching Adjustment (MA)-eligible assets for
the Group's annuity portfolio, and supplies valuable alternative assets to
third-party clients. Third-party AUM increased to £18.1bn (2022: £16.6bn)
and is on track to grow to £25-30bn by 2025.
Profit before tax was £129m, with investment and other variances of £(381)m,
driven primarily by the mark-to-market impact of higher interest rates on
LGC's portfolio. Whilst market conditions can drive short-term volatility in
valuations, we remain confident in the long-term profitability of our
alternative asset portfolio.
Specialist commercial real estate: supporting the levelling up agenda through
strategic partnerships
Across the UK and US, we are investing in Specialist Commercial Real Estate
(SCRE), including laboratory and flexible best-in-class facilities for
innovation-based, high-growth start-ups, scale-ups and global businesses in
the life sciences and technology sectors Building on our track record to
deliver place-based regeneration, we are delivering mixed-use redevelopment
for towns and cities, including our £4bn partnership with Oxford University
and our JV, English Cities Fund.
Bruntwood SciTech is now the largest dedicated property platform serving the
UK's innovation economy and aims to create a £5 billion UK-wide portfolio
that can support 2,600 high-growth businesses by 2032. In 2023, it secured
£500m of additional investment and welcomed Greater Manchester Pension Fund
(GMPF), the UK's largest local authority pension fund, to the partnership.
LGC's 50:50 partnership with Ancora, a US real estate developer and asset
manager dedicated to driving life sciences, research and technology growth in
North America, continues to grow with three sites across the US, providing a
valuable ecosystem for universities including Yale, Brown and Georgia Tech.
We are also helping to meet society's increasing need for data warehousing and
computer processing. As a compelling strategic growth opportunity, LGC has
provided further investment into its data centre platform Kao Data, alongside
leading infrastructure investment firm Infratil. In January 2024, Kao Data
secured a £206m debt facility, provided by Deutsche Bank. This further
demonstrates its growth from a start-up to a scale-up, its industry leading
reputation, and the demand for world-class infrastructure, engineered for
artificial intelligence (AI).
Our Clean Energy portfolio expanded into new sectors
The transition to net zero requires significant capital investment in new
technologies, assets and infrastructure. LGC's approach is deliberate in
combining both early-stage technology development and scale-up for adoption,
supported through our growth equity portfolio alongside investment into both
new and established clean energy infrastructure assets.
In our clean energy infrastructure portfolio, we continue to scale our
strategic partnership with NTR, leveraging LGIM's distribution capabilities
and NTR's sector expertise to raise and deploy significant capital into new
and existing renewable energy projects. In 2023, Legal & General
launched the L&G NTR Clean Power (Europe) Fund which raised €390m in its
first close, bringing NTR's total assets under management to over €900m
across its three funds and putting third party capital to work to drive
Europe's decarbonisation and energy security agenda.
In May 2023, Kensa (the country's leading manufacturer and installer of ground
source heat pumps), secured an additional £70m investment and welcomed
Octopus Energy as partners alongside LGC. Recognising the market opportunity
that decarbonising residential real estate presents, we have now committed
£49m across a range of investments in support of numerous initiatives,
including reducing construction emissions and developing technologies to
retrofit existing housing stock.
Housing: A multi tenure platform, diversified across affordability and life
stages
LGC's Build to Sell business, Cala, has performed well over 2023, in the face
of a challenging market. Having grown to become the 10th largest
housebuilder in the UK by revenue, Cala sold 2,917 units in 2023, delivering
revenue of £1.3bn and profit before tax of £112m. Cala's performance was
good compared to the wider market with sales rates remaining stable over 2023
and close to our long-term norm. Reservations on private units currently
stand at 43% of the full year, providing confidence in H1 2024 revenues.
Our Affordable Homes business has continued to establish itself as one of the
UK's leading institutional developers and managers of affordable housing, with
a total operational pipeline of 7,464 units and a Gross Asset Value of around
£1.2bn. It was given the highest ratings by its regulator for both
financial viability and governance, and is a strategic partner of Homes
England. The business is well placed to create assets which provide robust,
inflation-linked income for both our annuity portfolio and, increasingly,
third party investors.
Accelerating the growth of private asset managers through Alternative Finance
By investing in the real economy and technological advancements through our
General Partners (GP) Investing and Venture Capital platforms, we are
continuing to support growth businesses and deliver enhanced returns, whilst
boosting job creation and innovation.
The Pemberton platform has raised over €19bn (2022: €16.5bn) from a global
pool of 227 investors across seven strategies since we first invested in 2014.
As the market evolves, Pemberton continues to innovate and add new products
to its platform. In February 2023, Pemberton's Working Capital Finance
Strategy hit the milestone of $1 billion of committed funds, helping to create
further value in the business. Pemberton manages Limited Partner (LP)
capital on behalf of both LGC and LGRI, delivering direct investments which
strengthen the Group's competitive position in pricing to win large global PRT
deals.
In March 2023, we invested in ImpactA Global, a women-led Impact asset
management firm established to provide debt financing for sustainable
infrastructure projects in emerging markets. LGC committed up to $100m in
further funding to ImpactA as they secure opportunities to invest in
sustainable infrastructure that delivers attractive returns, alongside
positive social and environmental impact.
Our Venture Capital funds portfolio supports the growth of around 700
companies. The university spin-out market is an area of particular focus for
us, and a sector where we are seeing increasing appetite from third-party
capital partners to invest alongside us. Our unique proposition benefits
from long-standing relationships with the UK's leading research institutions,
helping create the outstanding businesses of the future.
Legal & General Investment Management (LGIM)
FINANCIAL HIGHLIGHTS £m 2023 2022
Management fee revenue 876 944
Transactional revenue 26 26
Total revenue 902 970
Total costs (628) (630)
Operating profit 274 340
Investment and other variances (76) (81)
Profit before tax 198 259
Asset Management cost:income ratio (%) 70 65
NET FLOWS AND ASSETS £bn
External net flows (38.4) 49.6
PRT Transfers (15.2) (3.1)
Internal net flows 1.6 0.1
Total net flows (52.0) 46.6
Persistency(1) (%) 86 88
Average assets under management 1,155 1,309
Assets under management 1,159 1,196
Of which:
- International assets under management(2) 465 441
- UK DC assets under management 163 135
1. Persistency is a measure of LGIM client asset
retention, calculated as a function of net flows and closing AUM.
2. International AUM includes assets from
internationally domiciled clients plus assets managed internationally on
behalf of UK clients.
Operating profit of £274m
Operating profit of £274m (2022: £340m) reflects the ongoing impact of
higher interest rates on the value of assets under management, with average
AUM 12% lower year-over-year. Revenue of £902m (2022: £970m) is down 7%,
impacted to a lesser extent by the decline in AUM, reflecting LGIM's conscious
shift towards higher margin business.
We are maintaining a disciplined approach to cost management whilst continuing
to invest deliberately and for the long-term. We took expense actions over
2023, including selective reshaping of the workforce and restraint on
recruitment and variable compensation. This led to flat costs in 2023 compared
to the prior year, despite significant inflationary pressure.
Assets under management (AUM) decreased by 3% year-on-year to £1,159.2bn
(2022: £1,195.7bn). External net flows of £(38.4)bn reflects UK Defined
Benefit clients adjusting their portfolios in response to improved funding
ratios, with many now positioning for PRT. LGIM is a beneficiary when our
clients undertake PRT with LGRI. Excluding UK Defined Benefit, LGIM's
external net flows were positive at £0.9bn, generating annualised net new
revenue of £24m. This reflects our focus on attracting flows into higher
margin areas such as ETF, Multi-Asset and Real Assets.
LGIM is a leader in responsible investment, and we continue to innovate and be
recognised for our strength in this growing area of the market, winning the
prestigious Pensions Age 'Sustainability Advisor of the Year' award in 2023.
As at 31 December 2023, LGIM managed £378.1bn (2022: £332.2bn) in
responsible investment strategies explicitly linked to ESG criteria for a
broad range of clients. 10 (#_ftn10) We now assess over 5,000 companies
across 20 'climate-critical' sectors, and we can apply exclusions to over
£176bn of assets.
Expanding our global footprint with International AUM
We are successfully building the business, growing international AUM by 81%
since 2018 to £465.4bn (40% of overall AUM). We are a leading corporate
pension manager in the US, working with clients to implement pensions'
de-risking strategies. We have refocused our index capabilities, creating
bespoke indices for clients via our Index Solutions team and have seen early
success with £6.4bn in higher margin Index Plus mandates in 2023. US assets
grew by 4% to £205.0bn over 2023.
In Europe, our growth is being led by expertise in ETFs, Active Fixed Income
and responsible investing. We have expanded the number of relationships with
clients and partners in our core markets of Germany, Italy, Switzerland and
the Nordics, and have recently opened an office in Zurich. In May, we
announced a partnership with AP7 to establish an innovative climate transition
strategy, raising £400m. Our AUM across mainland Europe is £85.7bn
representing a 11% annual increase.
Our AUM in Asia, including Japan, has reached £139.1bn, and we now have
clients across 9 countries in the region. AUM in Asia, excluding Japan, grew
by 12% over 2023 and included new mandates in Thailand, Korea and Taiwan. In
Japan, our AUM has almost doubled since 2019, and we are now Japan's 7(th)
largest asset manager. 11 (#_ftn11) In September we opened a new Singapore
office to serve clients in south-east Asia, building connectivity with our
London and Zurich offices to serve the important Global Financial Institutions
channel.
Supporting our institutional Defined Benefit clients to achieve their
objectives
As the UK DB market matures, we are supporting over 2,000 LGIM clients to
achieve their buyout objective, with many likely to choose LGRI as a pension
risk transfer partner. Over the last three years, 88% of LGRI UK PRT new
business premiums have come from LGIM clients, meaning LGIM will continue to
manage assets backing the pension liabilities for many years. Recent
examples include the British Steel Pension Scheme and the Boots Pension
Scheme, which insured a combined £13.5bn of pension liabilities with LGRI.
In the US, improved funding ratios due to higher interest rates have increased
demand for our customised liability hedging strategies. With over 75% 12
(#_ftn12) of Defined Benefit pension schemes now targeting buy-out as their
ultimate end-state, we expect to increase revenue by providing a full range of
investment solutions across the de-risking journey.
Ongoing strength in Defined Contribution
Our Defined Contribution (DC) business continues to attract new assets with
AUM of £163bn (2022: £135bn), and external net flows of £12.4bn
contributing to annualised net new revenue of £16m. This growth was supported
by Retail's Workplace pension business, which now has 5.2 million members.
This success is underpinned by LGIM's strong customer focus and innovative
product proposition, as shown by a 92% persistency rate among our DC
customers. AUM has more than doubled since 2018. In January 2024, we
submitted our application to the FCA for a new fund that will hold private
assets for DC investors. The fund will launch later this year, subject to
regulatory approval, and underlines our commitment to providing innovative
solutions to our DC investors' needs.
L&G also has one of the largest and fastest-growing UK Master Trusts,
which now has £25.4bn of AUM, and was the first commercial Master Trust to
surpass £20bn of AUM. The growth reflects the increasing appeal of the
structure for DC plans wishing to outsource their governance, investment and
administration. Our ability to offer investors an integrated blend of
high-quality investment solutions, pensions administration and Master Trust
governance is a significant source of competitive advantage. In June,
L&G's Master Trust won the coveted Corporate Advisor award for Best Master
Trust for the third year in a row.
Accelerating growth in Wholesale
We ended 2023 with record levels of Wholesale AUM at £68bn, growing 20% over
2023. In UK Wholesale, we achieved our highest ever gross sales and ranked
2nd across the industry. We launched new Active Fixed Income (AFI) funds,
and saw renewed client interest across our AFI strategies following the
normalisation of interest rates, including strong performance in our Strategic
Bond Fund. Our Multi-Asset capabilities continue to attract net inflows,
with AUM now totalling £11bn.
Since acquisition of the Canvas ETF business in 2018, revenue has more than
tripled. Our focus is on thematic strategies, with the range continuing to
show resilience, with £1.9bn of external net flows in 2023. This year we
launched an ETF partnership with Gerd Kommer in Germany, with a co-branded ETF
being distributed into the German Savings Plan market, raising £112m. LGIM
is ranked second based on AUM in the European thematic ETF market. 13
(#_ftn13)
Growing our Real Assets Platform
Real Assets saw total net flows of £1.5bn (2022: £3.2bn) driven by £2.9bn
of Private Credit transactions of which the majority support LGRI's PRT
proposition. Private Credit AUM reached £18.6bn 14 (#_ftn14) in 2023, and
we expect it to be core to future growth in flows as clients seek
diversification of secure income and value protection. UK Defined Benefit
investors are now accessing these capabilities through our successful SIAF and
STAFF 15 (#_ftn15) private credit funds, and DC investors are increasingly
considering our illiquid strategies.
Our Real Estate and Infrastructure Equity platform remains strong with AUM of
£18.3bn. In 2023, and as noted previously, we raised €390m in the first
close of the Clean Power (Europe) Fund working in partnership with NTR. We
have hired a team in the US to focus on real estate markets where we see
potential. Our property fund for UK retail investors is one of the market
leaders with over £1.2bn of AUM. We worked closely with LGC to build client
offerings across affordable housing, operational real assets and UK university
spin-outs, that we expect to launch with significant interest in 2024. Our
strategy is to externalise capabilities that we have built in collaboration
with other parts of Legal & General.
Investment Performance
Investment performance has been strong across our range of matching, tracking
and active strategies. For our UK-managed Active Fixed Income strategies,
64% of strategies out-performed over 1 year, 83% over 3 years and 95% over 5
years. US-managed Active Fixed Income strategies also performed well with
60% of strategies out-performing over 1 year, 75% over 3 years and 73% over 5
years. Multi-Asset strategies outperformed by 63% over 1 year, 36% over 3
years and 62% over 5 years. Within Private Markets, 71% of our Real Estate
Equity funds outperformed over 1 year, 100% over 3 years and 86% over 5 years.
Subsidiary remittances to Group
Subsidiary remittances(1) (£m) 2023 2022
LGAS 752 784
LGIM 140 279
LGA 185 97
Other(2) 472 394
Total 1,549 1,554
1. Represents cash remittances from subsidiaries to Group in respect of the
year's financial performance.
2. Other includes Legal & General Capital Investments Limited, Legal &
General Reinsurance, Legal & General Partnership Services Limited and
Legal & General Home Financing.
The level of subsidiary dividends ensures coverage of external dividends
(2023: £1,212m; 2022: £1,153m), Group related costs, with excess liquidity
being held within our regulated subsidiaries.
Borrowings
The Group's outstanding core borrowings totalled £4.3bn at 31 December 2023
(2022: £4.3bn). There is also a further £1.8bn (2022: £1.2bn) of
operational borrowings including £1.4bn (2022: £0.9bn) of non-recourse
borrowings.
Group debt costs of £212m (2022: £214m) reflect an average cost of debt of
4.8% per annum (2022: 4.8% per annum) on an average nominal value of debt
balances of £4.5bn (2022: £4.5bn).
Taxation
Equity holders' Effective Tax Rate (%) 2023 2022
Equity holders' total Effective Tax Rate(1) 11.9 10.4
Annualised rate of UK corporation tax 23.5 19.0
(1) Excluding the impact of the Bermudan corporate income tax enacted in 2023,
the investment variance from longevity assumption changes (see page 6 and 8)
and the buyout of the L&G pension scheme (see note 3.14.iii). Including
this impact, the effective tax rate in 2023 is (482.9)%
The Group has a credit for the year of £367m which includes a material
one-off tax credit of £340m on the recognition of a deferred tax asset
relating to the introduction of a new Bermuda corporate income tax regime.
Absent this impact, the effective tax rate reflects the varying rates of tax
that we pay on our businesses in different territories and the mixture of
profits and losses across those territories.
Solvency II
As at 31 December 2023, the Group had an estimated Solvency II surplus of
£9.2bn over its Solvency Capital Requirement, corresponding to a Solvency II
coverage ratio of 224%.
2023 2022
Capital (£m)
Own Funds 16,556 17,226
Solvency Capital Requirement (SCR) (7,389) (7,311)
Solvency II surplus 9,167 9,915
SCR coverage ratio (%) 224 236
Solvency II Own Funds Solvency II SCR Solvency II Surplus
Analysis of movement from 1 January to 31 December 2023(1) (£m)
Operational surplus generation 1,596 225 1,821
New business strain(2) 551 (989) (438)
Net surplus generation 2,147 (764) 1,383
Operating variances( ) (307)
Mergers, acquisitions and disposals (140)
Market movements (512)
Subordinated debt -
Dividends paid (1,172)
Total surplus movement (after dividends paid in the period) (670) (78) (748)
1. Please see disclosure note 5.01(iv) for further detail.
2. Reported new business strain includes impact from SII risk margin
reform.
Operational surplus generation increased to £1,821m (2022: £1,805m), after
allowing for amortisation of the opening Transitional Measures on Technical
Provisions (TMTP) and release of Risk Margin.
New business strain was £(438)m, primarily reflecting elevated PRT volumes
written at capital strain levels in line with our long-term average. This
resulted in net surplus generation of £1,383m (2022: £1,453m), which was in
excess of the dividends paid during the year.
Operating variances include the impact of experience variances, changes to
assumptions and management actions.
Market movements of £(512)m primarily reflect the impact of higher rates on
the mark to market valuation of our assets, partially offset by other, smaller
variances such as credit spread dispersion in sub-investment grade assets, and
inflation.
The movements shown above incorporate the impact of recalculating the TMTP as
at 31 December 2023.
Sensitivity analysis(3)
Impact on net of tax Solvency II capital surplus Impact on net of tax Solvency II coverage ratio
2023 2023
£bn %
100bps increase in risk-free rates 0.1 10
100bps decrease in risk-free rates (0.2) (11)
Credit spreads widen by 100bps assuming an escalating addition to ratings 0.4 14
Credit spreads narrow by 100bps assuming an escalating deduction from ratings (0.6) (18)
Credit spreads widen by 100bps assuming a flat addition to ratings 0.5 15
Credit spreads of sub-investment grade assets widen by 100bps assuming a level (0.2) (7)
addition to ratings
Credit migration (0.7) (10)
25% fall in equity markets (0.4) (3)
15% fall in property markets (0.9) (10)
50bps increase in future inflation expectations (0.1) (3)
10% increase in maintenance expenses (0.3) (4)
3. Please see disclosure 5.01 (vii) for further details.
The above analysis does not reflect all possible management actions which
could be taken to reduce the impact of each sensitivity due to the complex
nature of the modelling. In practice, the Group actively manages its asset
and liability positions to respond to market movements. Other than in the
interest rate and inflation stresses, we have not allowed for the
recalculation of TMTP. The impacts of these stresses are not linear
therefore these results should not be used to interpolate or extrapolate the
impact of a smaller or larger stress.
The results of these tests are indicative of the market conditions prevailing
at the balance sheet date. The results would be different if performed at an
alternative reporting date.
The impacts of credit spreads and risk-free rate sensitivities are primarily
non-economic arising from movements in balance sheet items that result from
changes in the discount rates used to calculate the value of assets and
liabilities. The credit migration stress, in the absence of defaults, delays
the emergence of operating surplus generation, but does not reduce the actual
quantum of future releases. Similarly, equity and property stresses only
result in losses if assets are sold at depressed values.
Solvency II new business contribution
Management estimates of the present value of new business (PVNBP) and the
margin as at 31 December 2023 are shown below(1):
£m PVNBP Contribution from Margin %
new business
LGRI - UK annuity business 8,859 654 7.4
Retail Retirement - UK annuity business 1,431 100 7.0
UK Protection Total 1,337 37 2.8
US Protection 1,123 128 11.4
The key economic assumptions as at 31 December 2023 are as follows:
%
Margin for risk 4.2
Risk-free rate
- UK 3.3
- US 3.9
Risk discount rate (net of tax)
- UK 7.5
- US 8.1
Long-term rate of return on non-profit annuities 4.9
1. Please see disclosure 5.02 for further details.
The future earnings are discounted using duration-based discount rates, which
is the sum of a duration-based risk-free rate and a flat margin for risk. The
risk-free rate shown above is a weighted average based on the projected cash
flows.
Economic and non-economic assumptions are set to best estimates of their
real-world outcomes, including a risk premium for asset returns where
appropriate. In particular:
· The assumed future pre-tax returns on fixed interest and RPI linked
securities are set by reference to the yield on the relevant backing assets,
net of an allowance for default risk which takes into account the credit
rating and the outstanding term of the assets. The weighted average
deduction for business written in 2023 equates to a level rate deduction from
the expected returns of 19 basis points. The calculated return takes account
of derivatives and other credit instruments in the investment portfolio.
· Non-economic assumptions have been set at levels commensurate with
recent operating experience, including those for mortality, morbidity,
persistency and maintenance expenses (excluding development costs). An
allowance is made for future mortality improvement. For new business,
mortality assumptions may be modified to take certain scheme specific features
into account.
The profits on the new business are presented gross of tax.
Principal risks and uncertainties
The directors confirm that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those that would
threaten its business model, future performance, solvency or liquidity.
The principal risks are set out below including details of how they have been
managed or mitigated. Further details of the Group's inherent risk exposures
are set out at Notes 7 and 15 to 17 of the financial statements.
RISKS AND UNCERTAINTIES RISK MITIGATION OUTLOOK
Investment market performance and conditions in the broader economy may We cannot completely eliminate the downside impacts on our earnings, The global economic outlook remains uncertain with the potential for interest
adversely impact earnings, profitability, or surplus capital. profitability or surplus capital from investment market volatility and adverse rates to remain at current levels for longer than anticipated by the markets
economic conditions, although we seek to position our investment portfolios and longer than required to subdue inflation. This could lead to significant
and wider business plans for a range of plausible economic scenarios and unintended damage to the broader economy, including a sustained period of low
investment market conditions to ensure their resilience across a range of investment and growth, reduced consumer spending, and higher unemployment. Our
The performance and liquidity of financial and property markets, interest rate outcomes. This includes setting risk limits on exposures to different asset businesses are primarily exposed to the UK and US economies.
movements and inflation impact the value of investments we hold in both classes and where hedging instruments exist, we seek to limit our exposure on
shareholders' funds and to meet the obligations from insurance business; the a financial reporting basis.
movement in certain investments directly impacts profitability. Interest rate
movements and inflation can also change the value of our obligations and Asset values, including commercial and residential property prices, remain
although we seek to match assets and liabilities, losses can still arise from
susceptible to reappraisal should the current economic outlook deteriorate, as
adverse markets. Falls in the risk-free yield curve can also create a greater Our Own Risk Solvency Assessment (ORSA) is integral to our risk management well as from a range of geo-political factors including the on-going war in
degree of inherent volatility to be managed in the solvency balance sheet, approach, and includes an assessment of the financial impacts of risks Ukraine and conflict in the Middle East. Towards the end of 2023 commercial
potentially impacting capital requirements and surplus capital. Falls in associated with investment market volatility and adverse economic scenarios property markets stabilised to an extent and some confidence returned. Within
investment values can reduce our investment management fee income. for our solvency balance sheet, capital sufficiency, and liquidity our construction businesses supply chain, cost inflation and labour shortages
requirements. continue to present risk.
In dealing with issuers of debt and other types of counterparty, the Group is We manage our exposure to downgrade and default risks within our bond The risk of credit default increases in periods of low economic growth, and we
exposed to the risk of financial loss. portfolios, through setting selection criteria and exposure limits, and using continue to closely monitor the factors that may lead to a widening of credit
LGIM's global credit team's capabilities to ensure risks are effectively spreads including the outlook for the real economy and fiscal and monetary
controlled, where appropriate trading out to improve credit quality. In our policy.
property lending businesses, our loan criteria take account of borrower
Systemic corporate sector failures, or a major sovereign debt event, could, in creditworthiness and the potential for movements in the value of security.
extreme scenarios, trigger defaults impacting the value of our bond
portfolios. Under Solvency II, a widespread widening of credit spreads and Although real incomes in the UK have risen in 2023, any reversal of this would
downgrades can also result in a reduction in our balance sheet surplus,
particularly impact economic activity in sectors reliant on discretionary
despite already having set aside significant capital for credit risk. We are We manage our reinsurer exposures tightly with the vast majority of our spending.
also exposed to default risks in dealing with banking, money market and reinsurers having a minimum A- rating, setting rating-based exposure limits,
reinsurance counterparties, as well as settlement, custody, and other bespoke and where appropriate taking collateral. Similarly, we seek to limit aggregate
business services. Default risk also arises where we undertake property exposure to banking, money market and service providers. Whilst we manage
lending, with exposure to loss if an accrued debt exceeds the value of risks to our balance sheet, we can never eliminate downgrade or default risks, We remain vigilant, closely monitoring all the names/assets in our portfolio
security taken. although we seek to hold a strong balance sheet that we believe to be prudent in the short-term, as well as forming views on the medium to long -term
for a range of adverse scenarios. outlook. Our credit portfolio remains overwhelmingly (99%) investment grade,
and our office property lending continues to focus on high-grade assets let to
investment grade or government tenants.
RISKS AND UNCERTAINTIES RISK MITIGATION OUTLOOK
We fail to respond to the emerging threats from climate change for our We recognise our scale brings a responsibility to act decisively in Over the next decade, the change necessary to meet global carbon reduction
investment portfolios and wider businesses. positioning our balance sheet to address climate change risks We assess targets will require societal adjustments on an unprecedented scale.
climate change risks in our investment process, including the management of
real assets and measure the carbon intensity targets of our investment
portfolios. Along with specific investment exclusions for carbon intensive
As a significant investor in financial markets, commercial real estate and sectors, we have set overall reduction targets aligned with the 1.5°C Paris The events of 2023, particularly the increasing frequency of record-breaking
housing, we are exposed to climate related transition risks. Abrupt shifts in Agreement. This includes setting near term science-based targets to support heat events and the extreme summer weather events experienced in the northern
the political and technological landscape impact the value of those investment our long-term emission reduction goals in line with our Climate transition hemisphere, have demonstrated that the impacts of increased climate volatility
assets associated with higher levels of greenhouse gas emissions. plan. can be significant and may emerge rapidly.
Physical risks, stemming from extreme climate outcomes, could impact the We continue to develop how we incorporate the potential physical impacts of If governments fail to ensure an orderly transition to low carbon economies,
valuation of at-risk assets, for example flood could impact the value of our the climate change on both assets and liabilities into our modelling and it increases the risk of sudden late policy action and large, unanticipated
property assets; and could also potentially have longer-term effects on projects, while also evolving our approach to include nature and biodiversity shifts in the asset values of impacted industries. Our transition plans aims
mortality rates. in our climate risk work. to minimise exposure to this risk, but its success is dependent on the
delivery of the policy actions and the climate reduction targets of the firms
we invest in. The actions governments take will also, significantly impact our
ability to meet our climate targets, and as the science of climate change
We are also exposed to reputation and climate related litigation risks should Alongside managing climate exposures, we closely monitor the political and evolves, we may need to adapt our actions. Additionally anti ESG sentiment,
our responses to the threats from climate change be judged not to align with regulatory landscape, and as part of our climate strategy we engage with particularly within countries with a high dependency on fossil fuel related
the expectations of environment, social and governance (ESG) groups. Our risk regulators and investee companies in support of climate action. As we change industries, may limit global efforts to address climate change and investment
management approach is also reliant upon the availability of verifiable how we invest, the products and services we offer, and how we operate, we are opportunities.
consistent and comparable emissions data. also mindful of the need to ensure that we have the right skills for the
future.
Although a broad set of actions to limit global warming is underway, we are
moving to a situation where the path to achieving a sub-1.5 temperature
increase is becoming narrower. This could also have an impact on our ability
to meet the climate-related targets we have set ourselves.
We expect a continuing and increased focus on nature and biodiversity risks
going forward.
A material failure in our business processes or IT security may result in Our risk governance model seeks to ensure that business management are We continue to remain alert to evolving operational risks and invest in our
unanticipated financial loss or reputation damage. actively engaged in maintaining an appropriate control environment, supported system capabilities, including those for the management of cyber risks, to
by risk functions led by the Group Chief Risk Officer, with independent ensure that our business processes are resilient. We also remain cognisant of
assurance from Group Internal Audit. the risks as we implement a new global operating model and IT platform for
LGIM and have structured the migration in phases to minimise change risks.
We have constructed our framework of internal controls to minimise the risk of
unanticipated financial loss or damage to our reputation. However, no system
of internal control can completely eliminate the risk of error, financial We continue to evolve our risk management approach for IT, operational
loss, fraudulent actions, or reputational damage. We are also inherently resilience and data access and privacy.
exposed to cyber threats including the risks of data theft and fraud and more
generally it is imperative that we maintain the privacy of our customers'
personal data.
Whilst we seek to maintain a control environment commensurate with our risk
profile, we recognise that residual risk will always remain across the
spectrum of our business operations and we aim to develop response plans so
There is also strong stakeholder expectation that our core business services that when adverse events occur, appropriate actions are deployed.
are resilient to operational disruption.
RISKS AND UNCERTAINTIES RISK MITIGATION OUTLOOK
Changes in experience, regulation or legislation may require revisions to our We undertake significant analysis of the variables associated with writing We have seen continued elevated levels of mortality in both the UK and the US.
reserves and capital requirements, and could also impact our reported solvency long-term insurance business to ensure that a suitable premium is charged for The causes are unclear, but may reflect indirect impacts of Covid 19 related
position and dividend policy. the risks we take on, and that provisions continue to remain appropriate for illness, and the deferral of diagnostics and medical treatments for other
factors including mortality, lapse rates, expenses, valuation interest rates conditions. There remains continued uncertainty as to the impacts of "long
and credit defaults in the assets backing our insurance liabilities. covid". Continued cost of living pressures and government spending decisions
also have the potential to affect mortality outcomes.
The pricing of long-term business requires the setting of assumptions for
long-term trends in factors such as mortality, lapse rates, expenses, interest
rates and credit defaults. Actual experience may require recalibration of We seek to have a comprehensive understanding of longevity, mortality and
these assumptions, changing the level of provisions and impacting reported morbidity risks, and we continue to evaluate wider trends in life expectancy. Along with the emergence of new diseases and changes in immunology impacting
profitability. However, we cannot remove the risk that adjustment to reserves may be mortality and morbidity assumptions, other risk factors that may impact future
required, although the selective use of reinsurance acts to reduce the impacts reserving requirements include a significant advance in medical science
to us of significant variations in life expectancy and mortality. leading to more effective treatments, beyond that anticipated, requiring
adjustment to our longevity assumptions.
Regulation defines the overall framework for the design, marketing, taxation
and distribution of our products, and the prudential provisions and capital
that we hold. Significant changes in legislation or regulation may increase We actively engage with government and regulatory bodies to assist in the
our cost base, reduce our future revenues, impact profitability or require us evaluation of regulatory change to promote outcomes that meet the needs of all Beginning 2024, the UK will enforce a 15% global minimum tax to multi-national
to hold more capital. stakeholders. To influence policy our interactions with government and policy firms, following OECD rules. Bermuda's new Corporate Income Tax will be
teams at regulators include face-to-face and virtual meetings, written effective from 1 January 2025. The Group is expected to be liable to UK top-up
responses to discussion papers and consultations, ad-hoc communications and tax in 2024 and Bermuda corporate tax from 2025 on profits arising from its
attendance at roundtables with industry peers. With our experience in various Bermuda reinsurance hub. We are actively working with relevant bodies on the
The prominence of the risk increases where change is implemented without prior sectors, we can explain how proposed policy translates into practice and implementation of these new legislations.
engagement with the sector. The nature of long-term business can also result identify potential issues or unintended consequences that might arise.
in some changes in regulation, and the re-interpretation of regulation over
Changes in capital standards, both in the UK and elsewhere, could impact our
time, having a retrospective effect on in-force books of business, impacting reported solvency position and dividend policy.
future cash generation.
When such regulatory changes move to the implementation stage, we undertake
detailed gap analysis work and depending on the scale of the work required,
establish project management arrangements with first and second-line teams Post-Brexit, the UK is reforming its capital regime to move from Solvency II
Changes in these areas can affect our reported solvency position and dividend working together. This is to ensure we delivery regulatory change effectively to Solvency UK. The key changes are designed to enable annuity product
policy. and efficiently, minimising disruption to our operations. providers to invest more broadly to diversify risk and support investment in
the UK economy. A 65% reduction in the Risk Margin took effect at the end of
2023, with reform of the Matching Adjustment due in 2024. We are actively
engaging with the PRA on the new regime's details and working to implement the
required changes.
The Bermuda Monetary Authority ("BMA") revised its capital regime for life
insurers in 2023, with changes effective from March 2024. The impact of the
proposed changes on L&G's business is expected to be modest.
The International Association of Insurance Supervisors ("IAIS") is finalising
the Insurance Capital Standards ("ICS"), a global minimum standard capital for
Internationally Active Insurance Groups ("IAIGs"). The ICS is expected to be
adopted end-2024. L&G Group, designated an IAIG by the PRA, has actively
participated in consultations on the standard. If Solvency UK is considered as
strong as the ICS, it may be used for ICS compliance and therefore would
result in little impact on L&G Group. We will continue to engage with both
the PRA and the IAIS during this period.
RISKS AND UNCERTAINTIES RISK MITIGATION OUTLOOK
Failure to effectively implement financial services regulatory or legislative We identify, track and review the impact of regulatory change through our The volume and burden of regulatory change remains high across the sectors we
change in a timely manner could lead to regulatory censure, reputational internal control processes, with material updates being considered at the operate in. We analyse, interpret and implement all relevant financial
damage and deteriorating customer outcomes. Executive and Group Risk Committees and the Group Board. Our processes are services legislation and regulation impacting our business units ensuring
designed to ensure compliance with all new and developing regulation. appropriate levels of governance and assurance.
We are exposed to several risks where effective identification and
implementation of regulatory changes are particularly important. These include We actively engage with appropriate regulatory bodies to ensure we maintain Key forthcoming developments in our risk areas include:
changes relating to our management of operational risk, conduct risk, climate high standards of business and deliver for our customers.
risk and health & safety risk. The magnitude or scope of some regulatory
changes can have a bearing on our ability to deliver our overall strategy.
Operational risk: work is underway to comply with the UK's new operational
In 2023 we successfully implemented the Consumer Duty for open products, with resilience rules by 31 March 2025 and similar developing rules in other
our work on legacy products well underway. We have also made progress on our jurisdictions
Regulatory or legislative changes can have a significant impact on our implementation of the UK's operational resilience rules which are due to come
business. Such changes could limit our ability to operate in certain markets into force in March 2025.
or sectors, potentially leading to a reduction in our customer base and
revenue. Conduct risk: the FCA continues to focus on Consumer Duty, with closed book
products in scope from 31 July 2024. Discussions are ongoing about the
We seek to influence the direction of travel on various regulatory policy advice/guidance boundary and a proposal for 'targeted support' to close the
themes at government and regulator level for the benefit of our customers and advice gap. In 2024, new rules on diversity and inclusion in financial
There is a risk that regulatory policies could develop in a manner that is other stakeholders. We have advocated on the development of the Consumer Duty, services are expected, likely leading to increased data collection, disclosure
detrimental to our business and/or customers. Alternatively, it could develop pension reforms, sustainability and diversity and inclusion. and reporting requirements. We maintain a focus on minimising the risks of
in a way that presents opportunities, but we fail to revise our strategy and financial crime for our customers and on our financial results.
adapt quickly enough to benefit.
Climate risk: there are a variety of moving pieces in the development of
Non-compliance with new regulations or legislation could potentially damage climate regulation at the UK, the US and EU level. We anticipate more focus on
our reputation. This could lead to a loss of customer trust and result in scenario testing and scrutiny on sustainability claims following the FCA's new
regulatory sanctions. anti-greenwashing rule and Sustainability Disclosure Regulations effective
from 31 May 2024. We're awaiting the UK Green Taxonomy and implementation of
ISSB disclosure standards.
Health & Safety: we have enhanced our governance processes and developed a
3-year strategy focusing on culture, quality, consistency, technology, and
keeping pace with change. Registration requirements for the new Buildings
Safety Act were met by the October 2023 deadline.
Strategic risk: we continue to follow the development of the government's
Mansion House reforms and wider pensions reforms, such as the Pensions
Dashboard work.
The success of our operations is dependent on the ability to attract and We seek to ensure that key personnel dependencies do not arise, through Competition for talent remains strong with skills in areas such as technology
retain highly qualified professional people. employee training and development programmes, remuneration strategies and and digital particularly sought after across many business sectors, including
succession planning. those in which we operate. We also recognise the risks posed by the outlook
for inflation in salary expectations across the wider employment market, and
internally we have taken steps to help our employees through direct financial
The Group aims to recruit, develop and retain high quality individuals. We are
support and by providing advice and resources to help them manage their
inherently exposed to the risk that key personnel or teams of expertise may Our processes include the active identification and development of talent financial well-being.
leave the Group, with an adverse effect on the Group's businesses. As we within our workforce, and by the highlighting our values and social purpose,
increasingly focus on the digitalisation of our businesses, we are also promoting Legal & General as a great place to work. As well as investing
competing for data and digital skill sets with other business sectors as well in our people, we are also transforming how we engage and develop
as our peers. capabilities, with new technologies and tools to support globalisation,
increase productivity and provide an exceptional employee experience.
RISKS AND UNCERTAINTIES RISK MITIGATION OUTLOOK
New entrants and/or technology may disrupt the markets in which we operate. We continuously monitor the factors that may impact the markets in which we We observe a continued acceleration of a number of trends, including greater
operate, including evolving domestic and internal capital standards, and are consumer engagement in digital business models and on-line servicing tools. In
maintaining our focus on our digital platforms. the current operating environment, businesses like ours have transformed
working practices, and we anticipate further investment in automation, using
There is already strong competition in our markets, and although we have had robotics and machine learning to enhance business efficiency. We are deepening
considerable past success at building scale to offer low-cost products, we
our understanding of the impacts of AI on our businesses and in the wider
recognise that markets remain attractive to new entrants. We have responded to the rapid advancement and accessibility of generative AI sector.
capabilities from third parties by launching a central AI Accelerator
programme. This initiative brought together colleagues across the Group to
shape and incubate our generative AI approaches, raise awareness and educate
We are also cognisant of competitors who may have lower return on capital our business, and deliver a secure environment for internal test and learn use Our businesses are also well positioned for changes in the competitive
requirements or be unconstrained by Solvency II. cases. landscape that may arise from pensions-related changes. We welcome innovation
in the market, such as the proposed roll out of defined benefit 'superfund'
consolidation schemes, as long as the security of members' benefits is
prioritised. We may see alternative de-risking offerings coming to the market
The continued evolution of AI has the potential to be a significant disrupting Our regulatory developments team keeps a close watch on the AI landscape targeting a similar segment to superfunds.
force across our businesses, for example by enabling new entrants to compete across all our regulators. We are actively engaged in numerous consultations
with potentially lower costs, and more efficient processes. The technology in relation to AI and generative AI.
itself could have an impact on asset valuations, and on our liabilities
including through its impact on the effectiveness of life sciences and health The pension dashboards initiative will also be a positive development.
care systems.
Legislation is being introduced in 2024 to make providing a qualifying
pensions dashboard service a regulated activity, and it is likely we will see
firms apply for this.
On the 'collective' defined contribution reform, while we have seen limited
demand for this to date, it holds the potential to disrupt both the workplace
and retirement income market.
Notes
A copy of this announcement can be found in "Results, Reports and
Presentations", under the "Investors" section of our shareholder website at
https://group.legalandgeneral.com/en/investors/results-reports-and-presentations
(https://group.legalandgeneral.com/en/investors/results-reports-and-presentations)
.
A presentation to analysts and investors will take place at 10:00am UK time
today at One Coleman Street, London, EC2R 5AA. There will also be a live
webcast of the presentation that can be accessed at
https://group.legalandgeneral.com/en/investors
(https://group.legalandgeneral.com/en/investors) .
A replay of the presentation will be made available on this website by 7 March
2024.
Financial Calendar Date
Ex-dividend date (2023 final dividend) 25 April 2024
Record date 26 April 2024
Annual General Meeting 23 May 2024
Dividend payment date 6 June 2024
2024 interim results announcement 7 August 2024
Ex-dividend date (2024 interim dividend) 22 August 2024
Record date 23 August 2024
Dividend payment date 27 September 2024
Definitions
Definitions are included in the Glossary in L&G Full Year Results 2023
Part 2.
Forward-looking statements
This report may contain 'forward-looking statements' with respect to the
financial condition, performance and position, strategy, results of operations
and businesses of the company and the Group that are based on management's
current expectations or beliefs, as well as assumptions and projections about
future events. These forward- looking statements can be identified by the fact
that they do not relate only to historical or current facts. Forward-looking
statements often use words such as 'aim', 'ambition', 'may', 'could', 'will',
'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek',
'continue', 'milestones', 'outlook', 'target', 'objectives' or other words of
similar meaning. By their very nature, forward-looking statements are subject
to known and unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and the Group's plans and objectives,
to differ materially from those expressed or implied in the forward-looking
statements. Recipients should not place undue reliance on, and are cautioned
about relying on, any forward-looking statements.
There are several factors which could cause actual results to differ
materially from those expressed or implied in forward-looking statements. The
factors that could cause actual results to differ materially from those
described in the forward-looking statements include (but are not limited to):
changes in global, political, economic, business, competitive and market
forces or conditions; future exchange and interest rates; changes in
environmental, social or physical risks; legislative, regulatory and policy
developments; risks arising out of health crises and pandemics; changes in tax
rates, future business combinations or dispositions; and other factors
specific to the Group. Any forward-looking statement contained in this
document is based on past or current trends and/or activities of the Group and
should not be taken as a guarantee, warranty or representation that such
trends or activities will continue in the future. No statement in this
document is intended to be a profit forecast or to imply that the earnings of
the Group for the current year or future years will necessarily match or
exceed the historical or published earnings of the Group. Each forward-looking
statement speaks only as of the date of the particular statement. Except as
required by any applicable laws or regulations, the Group expressly disclaims
any obligation to revise or update any forward- looking statement contained
within this document, regardless of whether those statements are affected as a
result of new information, future events or otherwise.
Caution about climate information
Annual Report and Accounts contains climate and ESG disclosures which use a
large number of judgments, assumptions and estimates in connection with
involved complex issues. The ESG disclosures should be treated with special
caution, as ESG and climate data, models and methodologies are often
relatively new, are rapidly evolving and are not of the same standard as those
available in the context of other financial information, nor are they subject
to the same or equivalent disclosure standards, historical reference points,
benchmarks, market consensus or globally accepted accounting principals. These
judgments, assumptions and estimates are likely to change over time, in
particular given the uncertainty around the evolution and impact of climate
change. In addition, the Group's climate risk analysis and net zero strategy
remain under development and the data underlying the analysis and strategy
remain subject to evolution. As a result, certain climate and ESG disclosures
made in this report are likely to be amended, updated, recalculated or
restated in future reports. This statement should be read together with the
Cautionary statement contained in the Group's latest Climate and nature
report. The information, statements and opinions contained in the Annual
Report and Accounts
do not constitute an offer to sell or buy or the solicitation of an offer to
sell or buy any securities or financial instruments nor do they
constitute any advice or recommendation with respect to such securities or
other financial instruments or any other matter.
Going concern statement
The Group's business activities, together with the factors likely to affect
its future development, performance and position in the current economic
environment are set out in the Annual Report & Accounts. The financial
position of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Group Results. Principal risks and
uncertainties are detailed on pages 56 to 59.
The directors have made an assessment of the Group's going concern,
considering both the current performance and the outlook for a period of at
least, but not limited to, 12 months from the date of approval of the
consolidated financial statements, using the information available up to the
date of issue of the Annual Report & Accounts.
The Group manages and monitors its capital and liquidity, and applies various
stresses, including adverse inflation and interest rate scenarios, to those
positions to understand potential impacts from market downturns. Our key
sensitivities and the impacts on our capital position from a range of stresses
are disclosed in section 5.01 of the Capital section of the Full year results
in this 2023 Preliminary Management Report. These stresses do not give rise to
any material uncertainties over the ability of the Group to continue as a
going concern. Based upon the available information, the directors consider
that the Group has the plans and resources to manage its business risks
successfully and that it remains financially strong and well diversified.
Having reassessed the principal risks and uncertainties (both financial and
operational) in light of the current economic environment, as detailed on
pages 56 to 59, the directors are confident that the Group and company will
have sufficient funds to continue to meet its liabilities as they fall due for
a period of, but not limited to, 12 months from the date of approval of the
financial statements and therefore have considered it appropriate to adopt the
going concern basis of accounting when preparing the financial statements.
Directors' responsibility statement
We confirm to the best of our knowledge that:
· The Group financial statements within the full Annual Report & Accounts,
from which the financial information within this preliminary announcement has
been extracted, and which have been prepared in accordance with UK-adopted
IFRSs, give a true and fair view of the assets, liabilities, financial
position and profit of the Group;
· The preliminary announcement includes a fair review of the development,
performance and position of the Group, as well as the principal risks and
uncertainties faced by the Group; and
· The directors of Legal & General Group Plc are listed in the Legal &
General Group Plc website:
https://group.legalandgeneral.com/en/about-us/our-management/group-board
(https://group.legalandgeneral.com/en/about-us/our-management/group-board)
By order of the Board
António Pedro dos Santos Simões Stuart Jeffrey Davies
Group Chief Executive Officer Group Chief Financial Officer
5 March 2024 5 March 2024
Enquiries
Investors
+44 203 124 2091
Edward Houghton, Group Strategy & Investor Relations Director
investor.relations@group.landg.com
+44 203 124 4415
Gregory Franck, Investor Relations Director
investor.relations@group.landg.com
+1 240 397 0053
Blake Carr, Investor Relations Director
investor.relations@group.landg.com
Media
+44 738 443 5692
Natalie Whitty, Group Corporate Affairs Director
+44 794 651 4627
Lauren Kemp, Group Head of Corporate Media & Issues
+44 778 857 7637 / +44 780 069 4425
Lucy Legh / Nigel Prideaux, Headland Consultancy
LandG@headlandconsultancy.com
1 (#_ftnref1) Solvency II margin on UK PRT business only.
2 (#_ftnref2) Solvency II coverage ratio incorporates the impact of
recalculating the Transitional Measures for Technical Provisions (TMTP) as at
31 December 2023.
3 (#_ftnref3) Calculated using profit for the year and average equity
attributable to the owners of the parent of £4,699m (2022: £5,014m).
4 (#_ftnref4) Calculated using the annualised UK corporation tax rate.
5 (#_ftnref5) Capital generation is Solvency II operational surplus
generation. Dividends on a declared basis and originally on the basis of a
flat final 2020 dividend, and 3-6% annual growth thereafter. Note: dividends
have grown at 5% since HY21 and the Board stated publicly in November 2022 its
aim to "continue to grow the dividend at 5% per annum to FY 2024":
ifrs17-rns-final.pdf (legalandgeneral.com)
(https://group.legalandgeneral.com/media/5l4bwpre/ifrs17-rns-final.pdf) .
Dividend decisions are subject to final Board approval. Note: we previously
also had an ambition to generate cumulatively £8-9bn cash over the period.
However, under IFRS 17 it is not possible to produce 'Net release from
operations' on which our cash generation metric was based. We therefore chose
to retire the cash generation ambition from FY 2022.
6 (#_ftnref6) PPF 7800 Index at 31 December 2023, LIMRA Q3 2023 retirement
market data, Statistics Canada, Mercer Pension Health Pulse 2022, WTW Group
Annuity Market Pulse - 2022 Annual Review, De Nederlandsche Bank (DNB) as at
Q3 2023 and L&G estimates.
7 (#_ftnref7) LCP report: Insurance enters a new phase: a skyrocketing
market, October 2022.
8 (#_ftnref8) ABI Q3 2023 Report.
9 (#_ftnref9) LIMRA Q3 2023 Ranking.
10 (#_ftnref10) AUM in responsible investment strategies represents only the
AUM from funds or client mandates that feature a deliberate and positive
expression of ESG criteria, in the fund documentation for pooled fund
structures or in a client's Investment Management Agreement. Mandates which
only invest in government bonds are not included, however where LGIM manages a
mandate (for a third-party client) which is invested in a broad asset exposure
that includes, but is not limited to, government bonds, these mandates would
be included subject to that mandate having a deliberate and positive
expression of ESG criteria.
11 (#_ftnref11) Ranked seventh by AUM, Japanese industry publication
(Pension News) March 2022.
12 (#_ftnref12) Hymans Robertson Risk Transfer Report 2023.
13 (#_ftnref13) Etfbook Rankings 2023.
14 (#_ftnref14) Figures reflect total managed assets including AUM from fund
of fund structures. As at 31 December 2023 of the total Real Assets AUM
(£36.9bn), £35.5bn was invested directly by clients in Real Assets funds.
15 (#_ftnref15) SIAF = Secure Income Assets Fund. STAFF = Short Term
Alternative Finance Fund.
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