Legal & General Group PLC · LSE:LGEN
Legal & General — Investor Presentation (January 2011)
20 slides from Legal & General's investor presentation, January 2011
Slide 1: Creating shareholder value through increasing cash flow, dividends and growing our business
1 Creating shareholder value through increasing cash flow, dividends and growing our business January 2011 2 Market leading businesses, strong group synergies INVESTMENT MANAGEMENT SAVINGS H1 2010: IFRS Profits: £98m (+32%) H1 2010: IFRS Profits: £54m (+217%) Cash: £70m (+29%) Cash: £38m (09: £(4m))
Slide 2: Strong performance against key objectives
3 Strong performance against key objectives. • Divergent and sustainable cash • Nine months net cash* up 14% to flows across multiple businesses £526m (9M09: £461m) which have market leading positions • New sources of cash flow from • LGIM assets under management up international dividends and 10% t
Slide 3: Multiple Levels of Synergy – LGIM at the centre of the Group
5 Multiple Levels of Synergy – LGIM at the centre of the Group ‘Hedge’ between Annuities Vesting annuities from mortality and longevity pension policies BPA Clients USA and Emerging Europe Markets Annuity Funds International International Distribution Distribution Bringing UK Bringing UK expertise i
Slide 4: Cash flow: strong prospects for sustained cash generation
7 Cash flow: strong prospects for sustained cash generation Estimated monetisation of worldwide VIF (undiscounted)1 (£m) Total 2010 2011 2012 International VIF monetisation 2,300 90 >90 >80 UK Business in-force at start of year2 7,200 700 630 560 2009 UK new business cash flows 700 70 50 50 2010 UK
Slide 5: Cash: 12% per annum growth in operational cash generation
9 Cash: 12% per annum growth in operational cash generation Operational Cash Generation 2007 – 2010 (£m) 726 654 580 402 2007 2008 2009 H1 2010 Annuities Housing & Protection Savings Investment Mgmt International Group Capital & Financing 10 New Business Strain: Significant reduction in cost of new
Slide 6: Cash: massive increase in free cash flow
11 Cash: massive increase in free cash flow Net Cash Generation 2007 – 2010 (£m) 100 526 599 320 230 2007 2008 2009 9M10 +20% Dividend: Interim £65m Interim £78m Final £160m Full £225m Cash Cover: 3.1x 2-3x Dividend: “Underlying growth rate - comfortably double digit” 12 Multiple Sources of Sustaina
Slide 7: Asset businesses are the major contributor to profit and cash
13 Asset businesses are the major contributor to profit and cash… Net cash £358m 74% 26% Asset businesses Insurance businesses Fee Spread Net Cash Net Cash Net Cash LGIM 70 Annuities1 141 Protection 51 Savings 38 Group 15 GI 10 International 33 Total Cash 108 Total Cash 156 Total Cash 94 Total Profi
Slide 8: Valuing the business - for generalist investors
15 Valuing the business - for generalist investors…. 31/12/09 30/06/10 EEV Per Share EEV Per Share H1 Net Valuation Per Share (£m) (p) (£m) (p) Cash (£m) P/E (£m) (p) LGIM 305 5 370 6 70 Business IFRS Retail Investments 100 2 107 2 14 General Insurance 120 2 137 2 10 counted UK 3,987 68 3,817 65 216
Slide 9: Summary
17 Summary • Divergent and sustainable cash flows across multiple businesses which have market leading positions • New sources of cash flow from international dividends and improvement in Savings performance. US capital management programme will produce more cash • We continue to grow our “stock” of
Slide 10: LGIM: continued excellence in execution, central to group strategy
19 Investment Management: A record first half for LGIM Operating Profit of £98m, Sales of £21bn. Financial highlights £m H1 2010 H1 2009 Investment Management IFRS Operating profit 98 74 Net cash generated 70 54 LGIM highlights Total revenue 182 143 Total costs 84 69 IFRS operating profit 98 74 Aver
Slide 11: Investment Management: new business continues to grow strongly
21 Investment Management: new business continues to grow strongly. Quarterly New Business 2009 – 2010 (£bn) 11.2 10.7 9.2 9.0 7.5 7.7 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 UK International LGIM Net new business H1 2010: £8.3bn 22 LGIM Funds: Diversified across passive and active asset classes £bn 30/0
Slide 12: Savings: Transformation story continues
23 Savings: Transformation story continues. Further growth in profits, cash, assets and margins. Financial highlights £m H1 2010 H1 2009 IFRS operating profit 54 17 Operational cash generation 72 40 New business strain (34) (44) Net cash generation 38 (4) New business APE 609 448 Assets under admini
Slide 13: Savings: Profit contribution across the business
25 Savings: Profit contribution across the business. Financial highlights £m H1 2010 H1 2009 IFRS operating profit Non Insured Savings 16 (8) Non Profit Savings 6 (4) With Profit Savings 32 29 Total 54 17 Net cash generation Non Insured Savings 14 (5) Non Profit Savings 1 (20) With Profit Savings 23
Slide 14: Risk: Another strong six months
27 Risk: Another strong six months. Healthy cash and profit contribution. Financial Highlights £m H1 2010 H1 2009 IFRS operating profit 310 223 Operational cash generation 212 216 New business strain (10) 13 Net cash generation 202 229 Protection new business EEV margin (%) 6.0 7.0 Protection Gross
Slide 15: Bulk Annuities: Strong New Business Pipeline
29 Bulk Annuities: Strong New Business Pipeline BPA Quotes Q3 2010 BPA Quotes Q3 2010 140 18 16 120 Number of Quotes 14 Number of Policies 100 12 80 10 60 8 6 40 4 20 2 0 0 £0-10m £10-100m £100- >£1000m £0-10m £10-100m £100- >£1000m 1000m 1000m Average Average quote 2.6 35.3 259.2 0 policy 1.9 16.3
Slide 16: Annuity Pricing
31 Annuity Pricing. Modelled Prudent Reserves Market Pricing Dynamics Positive New Business Strain Solvency Capital i.e. Day 1 capital 4% release Other Prudent Release of Reserves prudent reserves generates Negative New Re-Investment Business Strain c100bps of cash Reserve i.e. Day 1 capital each ye
Slide 17: International: generating cash from mature markets, investing in emerging markets
33 International: generating cash from mature markets, continuing to invest in emerging markets. Financial highlights £m H1 2010 H1 2009 USA 44 45 Europe (France and Netherlands) 21 20 Middle East and Asia (Egypt, the Gulf and India) (4) - IFRS operating profit 61 65 Net cash generated 33 - US divid
Slide 18: Cash: Legal & General Definition
35 Strong fit with strategy Major emerging insurance market Strong banking partners with nationwide distribution Good ability for L&G to influence start up and ongoing oversight Excellent first year Successful launch, at speed - £43m APE in first nine months Strong out performance of plan Partnershi
Slide 19: Key events and ADR Programme
37 Key events 2011 24-26th- January Germany/Scandinavia Roadshow 17th March Preliminary Results 21-24th March London/Scotland Roadshows 29 March Morgan Stanley Conference 4-8th April US Roadshow 4th May Interim Management Statement 38 ADR Programme Legal & General Group ADR shares trade on the US ov
Slide 20: Forward looking statements
39 Forward looking statements This document may contain certain forward-looking statements relating to Legal & General Group, its plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward- looking statements involve uncertai
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