REG - Legal & General Grp - Legal & General Group plc Capital Markets Event

Legal & GeneralAnnouncement

12/06/2024 07:00

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RNS Number : 0303S  Legal & General Group Plc  12 June 2024

 Legal & General Group Plc

 12 June 2024

 
Sustainable Growth, Sharper Focus, Enhanced Returns
Legal & General sets out refreshed strategy and financial targets

Group shares vision for a growing, simpler and better-connected business,
focused on three core divisions 1 , and announces £200m share buyback for
2024 as first step of plan to increase returns to shareholders.

Sustainable growth

·   Institutional Retirement: Grow Pension Risk Transfer (PRT) volumes,
writing £50-65bn in the UK by year-end 2028 2 , increasing store of future
profit 3  and generating permanent capital to catalyse asset management growth

·   Asset Management: Invest to drive scale and profitability, achieving
cumulative Annualised Net New Revenues of £100-150m (2025-28) and growing
Private Markets platform assets under management to £85bn by FY 2028

·   Retail: Strengthen lifetime Retail proposition, including by leveraging
growing Workplace DC platform for customer acquisition, targeting £40-50bn of
cumulative net flows in Workplace DC (2024-28)

Sharper focus

·   Create single Asset Management division, bringing LGIM (Legal &
General Investment Management) and LGC (Legal & General Capital) together
as a unified, global, public and private markets asset manager

·   Embed revised Capital Allocation policy across the Group, aligning
investment to rigorous assessment of performance and strategic fit

·   Maximise the value of non-strategic assets through a new Corporate
Investments Unit

Enhanced returns

·   Target 6-9% core operating EPS CAGR (2024-27) at an operating return on
equity of over 20% 4 

·   £5-6bn cumulative Solvency II operational surplus generation across
2025, 2026 and 2027

·   The Board intends to return more to shareholders over 2024-27 5 ,
through a combination of dividends and buybacks, with 5% DPS growth to FY24
and a first share buyback of £200m in 2024, followed by 2% DPS growth per
annum out to FY27 and further similar buybacks 6 

Group Chief Executive Officer, António Simões, and Group Chief Financial
Officer, Jeff Davies, will present the Group's strategy at a Capital Markets
Event at 930am (BST). A link to the presentation webcast is here
(https://group.legalandgeneral.com/en/investors) . Slides will be made
available shortly before 930am.

Legal & General Group CEO, António Simões said:

"Over the last 5 months we have rigorously reviewed our business, listening to
investors, customers, partners and employees. This work has deepened my belief
in our strong foundations and excellent potential.

L&G is in prime position to respond to and benefit from major structural
and societal changes. Changing demographics, climate transition, economic
uncertainty and technology are driving demand for trusted, experienced
investors that can manage risk through the cycle, originate productive assets,
and deliver returns for savers.

Our vision is for a growing, simpler, better-connected L&G, focused on
three core business divisions, and set apart by our shared sense of purpose
and powerful synergies.

By seizing the opportunity in Institutional Retirement while investing to
scale and deepen our capabilities in Asset Management and Retail, we will
evolve our business to better address society's changing investment needs, and
shift towards fee-based earnings at higher returns on capital. We will make
the most of our international business opportunities, with a particular focus
on the US.

The strategy and targets set out today signal L&G's ambition and
commitment to invest to grow our business, and reward our shareholders for
their support."

Divisional strategies

Institutional Retirement

The Group is well placed to seize the significant Institutional Retirement
opportunity, both in the UK and internationally. The addressable market is
significant - only 10% of the c.£6.6tn of Defined Benefit pension assets in
the UK, the US, Canada and the Netherlands have so far transferred to
insurers.

In the UK, where we are the market leader, volumes are expected to average
£45bn per annum over the next decade, up from c£25bn per annum since 2018.
Internationally, we have an established position in the US and are growing in
Canada and exploring our partner model in the Netherlands. We will continue to
pursue a disciplined approach to profitable growth in these markets.

By FY 2028 we expect to:

·     Grow Institutional Retirement operating profits at 5-7% CAGR
(2023-2028)

·     Write £50-65bn of UK PRT at a capital strain of less than 4%
(2024-2028)

Asset Management

We are bringing together LGIM and LGC into a single, global asset manager, and
investing to scale and deepen their complementary capabilities across public
and private markets.

We are committed to driving growth in public markets, creating a scalable
global operating platform, driving margin expansion through operating leverage
and increasing average revenue margin.

We plan to materially scale our in-house and origination platform capability
in private markets, significantly expanding our capabilities and client
offerings across Real Estate, Private Credit and Infrastructure, including
through an accelerated programme of fund launches.

Michelle Scrimgeour has announced her intention to step down from the role of
LGIM CEO, and the Group has begun a global search for a CEO to lead the growth
of the combined Asset Management division. Michelle will continue as CEO of
the legal entity, LGIM (Holdings) Limited, until this appointment is made, and
will lead the transition and establishment of our new division with Laura
Mason 7 , who is appointed CEO of Private Markets. Both will report to the
Group CEO.

By FY 2028 we expect to:

·     Deliver operating profit of £500-600m by 2028

·     Achieve Cumulative Annualised Net New Revenues (ANNR) of £100-150m
(2025-2028)

·     Grow our Private Markets platform AUM 8  to £85bn (£48bn at FY23)

Retail

We will invest to drive growth in retirement and savings, recognising the
opportunities presented by the growth in defined contribution and decumulation
assets, and the corresponding customer need for support and guidance.

We will focus on scaling our Workplace platform profitably, leveraging our
strong Mastertrust position and opportunities in technology to improve the
quality and efficiency of our proposition.

At the same time, we will aim to increase the profitability and capital
contribution of our Protection businesses, making better use of technology and
AI to improve efficiency and customer experience.

By FY 2028 we expect to:

·     Achieve 6-8% CAGR in operating profit (2023-2028)

·     Generate £40-50bn of Workplace net flows (2024-2028)

Corporate Investments

Non-strategic assets, most materially CALA, will be managed by a Corporate
Investments Unit, reporting to the Group CFO, with the goal of maximising
shareholder value ahead of potential divestment.

Notes

About Legal & General Group plc

Established in 1836, Legal & General is one of the UK's leading financial
services groups and a major global investor, with £1.2 trillion in total
assets under management (as at FY23) of which c40% (circa £0.5 trillion) is
international.

We have a highly synergistic business model, which continues to drive strong
returns. We are a leading international player in Institutional Retirement, in
Retail Savings and Protection, and in both public and private markets through
our Asset Management division. Across the Group, we are committed to
responsible investing and dedicated to serving the long-term savings and
investment needs of customers and society.

As at 7 June 2024, we estimate the Group's Solvency II coverage ratio to be
224%.

As at 11 June 2024, Legal & General has a market capitalisation of £14.6
billion.

Definitions

Store of future profit: Store of future profit is defined as gross of tax
Contractual Service Margin (CSM) and Risk Adjustment (RA).

Annualised net new revenues: The annualised revenue on new monies invested by
our clients in the year, minus the annualised revenue on existing monies
divested by our clients in the year, plus or minus the annualised revenue on
switches between asset classes / strategies by our clients in the year.

Core operating profit: Operating profit performance of the core businesses
(excluding the Corporate Investments unit) less Group debt and expenses.

Core operating earnings per share: Core operating profit, reduced by tax at
the UK corporation tax rate, divided by the average number of shares over the
year.

Operating return on equity: Operating profit, reduced by tax at the UK
corporation tax rate, divided by average IFRS equity.

Forward-looking statements

This announcement contains certain forward-looking statements relating to
Legal & General, its plans and its current goals and expectations relating
to future financial condition, performance and results.

Statements herein, other than statements of historical fact, regarding Legal
& General's future results of operations, financial condition, cash flows,
business strategy, plans and future objectives are forward-looking statements.
Words such as "targets", "believe", "expect", "aim", "intend", "plan", "seek",
"will", "may", "should", "anticipate", "continue", "predict" or variations of
these words, as well as other statements regarding matters that are not
historical facts or regarding future events or prospects, constitute
forward-looking statements. Please read more about the risks facing Legal
& General in the section entitled 'Principal risks and uncertainties' on
pages 56 to 59, as well as and in notes 7 and 15-17, of the 2023 annual report
and accounts available at https://group.legalandgeneral.com/
(https://group.legalandgeneral.com/) . These forward-looking statements are
based on current views with respect to future events and financial
performance. By their nature, forward-looking statements involve uncertainty
because they relate to future events and circumstances which are beyond Legal
& General's control, including, among others, UK domestic and global
economic and business conditions, market related risks such as fluctuations in
interest rates and exchange rates, the policies and actions of regulatory and
Governmental authorities, the impact of competition, the timing impact of
these events and other uncertainties of future acquisitions or combinations
within relevant industries. As a result, Legal & General's actual future
condition, performance and results may differ materially from the plans, goals
and expectations set out in these forward-looking statements and persons
reading this announcement should not place reliance on forward-looking
statements. Nothing in this announcement should be construed as a profit
forecast or to imply that the earnings of Legal & General for the current
year or future years will necessarily match or exceed its historical or
published earnings.

These forward-looking statements are made only as at the date on which such
statements are made and Legal & General Group Plc does not undertake to
update forward-looking statements contained in this announcement or any other
forward-looking statement it may make.

Enquiries

 

Investors

 

Edward Houghton, Group Strategy & Investor Relations Director

investor.relations@group.landg.com (mailto:investor.relations@group.landg.com)

+44 203 124 2091

 

Gregory Franck, Investor Relations Director

investor.relations@group.landg.com (mailto:investor.relations@group.landg.com)

+44 203 124 4415

 

 

Media

 

Natalie Whitty, Group Corporate Affairs Director

Natalie.whitty@group.landg.com (mailto:Natalie.whitty@group.landg.com)

+44 738 443 5692

Elizabeth Bickham, Communications team

elizabeth.bickham@lgim.com (mailto:elizabeth.bickham@lgim.com)

+44 7887 930 518

 

Will Throp, Communications team

will.throp@lgim.com (mailto:will.throp@lgim.com)

+44 7791 899 779

 

Lucy Legh / Nigel Prideaux, Headland Consultancy

LandG@headlandconsultancy.com (mailto:LandG@headlandconsultancy.com)

+44 20 3805 4822

 

 1  New business divisions will be known as Institutional Retirement (formerly
LGRI), Asset Management (formerly LGIM and LGC) and Retail

 2  Subject to market conditions and achieving target returns

 3  See Notes for financial definitions

 4  We expect 2024 Core Operating Profit to grow by mid-single digits year on
year, with growth weighted more heavily to H2

 5  Compared to returns that would result from maintaining the current 5% per
annum dividend growth rate over this period

 6  All capital returns will be subject to the market environment, our views
on solvency buffers, and opportunities for investment in the business,
including Institutional Retirement

 7  Laura Mason was previously CEO of L&G Capital

 8  Including 100% of Pemberton fee-earning AUM

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