REG - Legal & General Grp - Trading Statement

Legal & GeneralAnnouncement

07/07/2022 07:17

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RNS Number : 6002R  Legal & General Group Plc  07 July 2022

Legal & General: Cash and capital generation ahead of ambition

Legal & General Group Plc ("Legal & General" or "the Group") has had a
good start to 2022. Operating performance is in line with our expectations.
Solvency is strong, and we expect to deliver double-digit growth in cash and
capital generation at H1.

·   LGRI (Legal & General Retirement - Institutional) has transacted
£4.5 billion of global PRT business to 30 June 2022 (£3.1bn at H1 2021).
This comprises £3.8bn of UK PRT (£3.0bn at H1 2021) and £0.7bn of
International PRT (£0.1bn at H1 2021).

In the UK, highlights include:

o A £2bn+ follow-on transaction with a large UK pension scheme, executed
under an umbrella agreement;

o c£370m buy-in with Heathrow's British Airports Authority (BAA) Pension
Scheme, securing benefits for more than 1,400 retirees;

o c£225m buy-in with Newell Rubbermaid UK Pension scheme, securing benefits
for c1,700 retirees.

For our International business, highlights include:

o Writing our largest ever US transaction (over $550m), our third transaction
with this client;

o A third Canadian deal for CAN$230m, as we start to build momentum through
our strategic partnerships in Canada.

Volumes have been written at margins and capital strain that are in line with
or better than our long-term average, largely driven by good asset origination
and reinsurance terms.

We have a strong pipeline for the second half of the year and into 2023.
Demand for global PRT is growing, as rising interest rates and widening credit
spreads reduce pension deficits and allow more funds to consider de-risking.
We have achieved self-sustainability on the UK annuity portfolio in 2020 and
2021, and expect it to be self-sustaining again this year.

·   LGC (Legal & General Capital) - the Group's alternative asset
origination platform - continues to perform strongly. We remain on track to
achieve our stated 2025 ambitions: operating profit of £600-700m and
fee-generating third party capital of £25-30bn.

o Housing is performing well and we are managing our supply chains
effectively. CALA (our Build to Sell business) has sold over 1,520 units to 30
June 2022 (1,479 units at H1 2021). Revenues are c£700m (£610m to H1
2021)(1) (#_ftn1) . Reservations on private units currently stand at 90% of
the full year target, giving confidence in the outcome for 2022.

o Our Alternative Finance (Pemberton) and Venture Capital (VC) investments
continue to perform strongly. Pemberton expects total committed capital to be
over €14bn (€10bn at H1 2021) and revenue to be over €44m (€31m at H1
2021).

o Our Urban Regeneration platform recently announced a partnership agreement
with West Midlands combined authority to invest £4bn in regeneration, housing
and levelling up across the West Midlands (see press release here
(https://group.legalandgeneral.com/en/newsroom/press-releases/legal-general-announce-4bn-investment-commitment-working-in-partnership-with-west-midlands-combined-authority)
).

o We were also pleased to announce recently LGC's first US investment, with
seed capital for a $4bn platform (Ancora) to fund major life science and
technology assets across multiple regional US markets (see press release here
(https://group.legalandgeneral.com/en/newsroom/press-releases/legal-general-capital-makes-first-u-s-investment-with-seed-capital-for-4-billion-platform-to-fund-major-life-science-and-technology-assets-across-multiple-regional-u-s-markets)
). Ancora will start investing by August.

o We have seen notable progress in the flow of asset creation from LGC this
year, which remains on track to deliver close to £1bn of new assets to LGRI
over 2022, including Sky Studios Elstree.

·   In Retail, protection gross written premiums (GWP) were higher year on
year; individual annuity sales and mortgage advances were lower:

o Retail protection new business was £85m (£105m at H1 2021). Retail
protection GWP was c£735m (£714m at H1 2021).

o Group protection new business was £63m (£55m at H1 2021). Group protection
GWP was c£285m (£274m at H1 2021).

o US protection new business was £48m (£43m at H1 2021). US protection GWP
was c£575m (£512m at H1 2021).

o Individual annuity sales were £453m (£483m at H1 2021) and lifetime
mortgage & retirement interest only advances were £338m (£414m at H1
2021).

The performance of Salary Finance (an employee benefits finance platform in
which we have a 48% holding) remains strong. Both revenue and core
profitability have continued to grow.

·   LGIM (Legal & General Investment Management) has achieved strong
external net flows of over £50bn (£26bn at H1 2021), supported by a strong
International contribution (more than half of the total) and ongoing growth in
higher-margin areas including thematic ETFs, Multi-asset and Fixed Income. At
half year, we expect the contribution to revenue from flows largely to offset
the impact of market movements over the past year.

Our diversified, actively managed annuity portfolio continues to perform
resiliently with no defaults, and with over £2bn more upgrades year to date
than downgrades. The portfolio's direct investments also continue to perform
strongly, with 100% of scheduled cash-flows paid year to date, reflecting the
high quality of our counterparty exposure. Our annuity portfolio is
substantially cash-flow matched. The Group's overall exposure to inflation is
minimal.

The Group estimates its Solvency coverage ratio as at 30 June 2022 is c215%(2)
(#_ftn2) , up at least 25 percentage points from FY 2021 (187%), principally
reflecting the contribution from higher interest rates and strong ongoing
operational surplus generation, and after paying the 2021 final dividend.
Group cash-flows remain strong and return on equity is consistent with our
c20% historic performance. As indicated at FY 2021, we expect to achieve
£1.8bn of capital generation in 2022. Ratings from Fitch (AA-), Moody's (Aa3)
and S&P (AA-) remain unchanged, highlighting the ongoing strength of our
business(3) (#_ftn3) .

 

Sir Nigel Wilson, Chief Executive, Legal & General, said:

"Our year-to-date operating performance is in line with expectations, with
cash and capital generation running slightly ahead of our five-year ambition
and ROE at c20%. This reflects the strong execution of our stated strategy -
which is closely aligned to long-term structural growth drivers such as ageing
demographics, investing in the real economy, and addressing climate change -
both in the UK and, more recently, in the US. The Group's overall exposure to
inflation is minimal and our balance sheet is strong: the recent increase in
solvency provides further security and optionality. We remain confident in
Legal & General's ability to grow profits sustainably and at attractive
returns over the long-term."

 

Notes to editors

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 over £1.4 trillion in total
assets under management (as at FY 2021) of which a third is international. We
also provide powerful asset origination capabilities. Together, these underpin
our leading retirement and protection solutions: we are a leading
international player in pension risk transfer, in UK and US life insurance,
and in UK workplace pensions and retirement income. Through inclusive
capitalism, we aim to build a better society by investing in long-term assets
that benefit everyone. As at 6 July 2022, Legal & General has a market
capitalisation of £13.9 billion.

Forward-looking statements

This announcement may contain certain forward-looking statements relating to
Legal & General, its plans and its current goals and expectations relating
to future financial condition, performance and results. 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.
These forward-looking statements are made only as at the date on which such
statements are made and Legal & General does not undertake to update
forward-looking statements contained in this announcement or any other
forward-looking statement it may make.

 

Further information

Investors

Edward Houghton       Group Strategy and Investor Relations
Director                    +44 (0)20 3124 2091

Sujee Rajah                Investor Relations
Director
            +1 312 964 3034

Nim Ilankovan             Investor Relations
Director
+44 (0)20 3124 2054

 

 

Media

Graeme Wilson           Tulchan
Communications
                        +44 (0)20 7353 4200

 

(#_ftnref1) (1) Revenue figures include income from joint ventures

(#_ftnref2) (2) Provisional calculation

(#_ftnref3) (3) Ratings shown are Legal and General Assurance Society (LGAS)
Limited financial strength rating

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