TIDMLGEN
RNS Number : 0496F
Legal & General Group Plc
12 November 2020
Legal & General announces new 5 year dividend, cash and
capital ambitions
Legal & General Group Plc ("Legal & General") will host
a virtual capital markets event for investors and analysts today,
Thursday 12 November. Presentations on the Group's strategy,
financial performance and ambitions will be made available on the
Group's website from 7am GMT:
www.legalandgeneralgroup.com/investors/results-reports-and-presentations/
A live Q&A teleconference with Legal & General's
executive management team will be held at 10am GMT:
+44 20 3936 2999 / +1 855 9796 654 (access code: 641392).
2020 Trading Update
The Group's ambition remains for full year 2020 operating profit
to be broadly in line with 2019 (2019: GBP2.3bn [1] ).
Legal & General has delivered a resilient performance in the
year to date. [2] Our balance sheet has remained robust, with the
Group's solvency ratio currently in the mid-170s (%), slightly up
from H1 20 (173%). Our annuity asset portfolio has performed well
against a challenging market backdrop. The traded portfolio has
experienced no defaults, and just 0.8% of net downgrades to
sub-investment grade compared to around 1.7% for the index. The
direct investment portfolio has also experienced no defaults and
received 99.5% of scheduled cash flows.
Our market leading businesses have continued to trade well,
notwithstanding the wider macro-economic environment.
-- Legal & General Retirement Institutional ("LGRI") - the
PRT market has remained very active in 2020. In the UK we have
written GBP4.7bn across 36 transactions year to date, and have
another GBP1.7 billion in exclusive negotiations which we expect to
complete in 2020. The US has had a strong performance completing
$1.2bn. [3] We have good visibility over future transactions and
are actively quoting on a pipeline that exceeds GBP20bn. We
anticipate an approximate GBP200m LGR mortality reserve release
(CMI-18) at year-end.
-- Legal & General Investment Management ("LGIM") - despite
significant market volatility, LGIM's diversified asset base has
been resilient with AUM at GBP1,234bn and GBP6.4bn of positive
external net flows as at 30 September.
-- Legal & General Capital ("LGC") - housing sales have
recovered in the second half following the first half lockdown. As
previously guided, full year residential housing sales are expected
to be down 30% despite the strong second half performance. We are
pleased with the progress made by Pemberton, ADV and NTR. Pemberton
has now reached EUR8.5bn of committed capital.
-- Legal & General Insurance ("LGI") - year to date gross
written premiums in the UK and US have reached GBP1,475m, up 5% on
the prior year. At the half year we set up a prudent GBP44m future
claims reserve, which is significantly in excess of H1
COVID-related claims.
-- Legal & General Retirement Retail ("LGRR") - continued
recovery in individual annuity volumes: GBP747m year to date, down
10% year on year (but down just 2% in the second half). Lifetime
mortgage advances of GBP613m, down 26% year on year.
-- Additionally, we recently completed the sale of the Mature
Savings business and expect to report the remaining IFRS profit on
disposal of c.GBP325m in our full year results.
Group Strategy and Financial Ambitions
Legal & General is, primarily, a global provider of
Retirement Solutions to corporates and individuals, with core
skills in asset management and origination, mortality risk and
technological innovation. We operate at scale, and are strongly
positioned to capitalise on significant structural growth
opportunities across our chosen markets. We are committed to
Inclusive Capitalism and ESG, including positive Climate Change
action.
We are today setting out new five year financial ambitions for
the Group.
As 2020 is a pause year, the Board's current intention is to
keep the final 2020 dividend flat. [4]
From 2021 the Board intends to grow the dividend at low to
mid-single digits.
Over the period 2020-2024 our ambition [5] is for:
-- Cash and capital generation to significantly exceed dividends*
-- EPS to grow faster than dividends
-- Net surplus generation (i.e. including new business strain) to exceed dividends
*We intend, in aggregate, to generate GBP8.0-9.0bn both of cash
and capital, and to dividend GBP5.6-5.9bn. [6]
Over the next five years we expect to deliver diversified growth
across the Group. LGRI and LGRR provide highly predictable, stable
cash flows from their growing back-books. We expect the annuity
portfolio to be fully self-financing in the next three to five
years. Our asset management and origination businesses, LGIM and
LGC, operate in attractive and profitable markets, and maintain a
strong commitment to ESG-aligned investing. LGI is applying
technology best practice to transform to sustain its UK leadership,
to grow in the US and to continue to expand into adjacent
markets.
Nigel Wilson, Group CEO, said:
"Legal & General has a clear and well established strategy,
and five strong businesses with distinct competitive advantages.
The markets we operate in are large and growing and we are well
placed to capitalise. We have announced today a clear set of five
year financial ambitions, delivering an attractive combination of
income and growth. We remain ambitious for the future, and are
committed to delivering profitable growth through Inclusive
Capitalism and ESG."
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
international businesses in the US, Europe, Middle East and Asia.
With over GBP1.2 trillion in total assets under management, we are
the UK's largest investment manager for corporate pension schemes
and a UK market leader in pension risk transfer, life insurance,
workplace pensions and retirement income. As at 11 November 2020,
Legal & General has a market capitalisation of GBP14.1
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)7585 905 799
Alyssa Manning Investor Relations Director +44 (0)20 3124 2047
Sujee Rajah Investor Relations Director +1 312 964 3034
Media
John Godfrey Corporate Affairs Director +44 (0)20 3124 2090
Graeme Wilson Tulchan Communications +44 (0)20 7353 4200
[1] 2019 full year operating profit comprises GBP2,651m
operating profit from divisions, partially offset by GBP365m of
group debt and central costs.
[2] To 31 October unless specified otherwise.
[3] As at 4 November.
[4] The Board will make a final decision at year-end.
[5] Our stated ambition is based on the aggregate performance
over a five-year period. Performance may vary from year to year and
individual statements may not be met in each year on a standalone
basis.
[6] Cash generation is IFRS net release from operations
(excluding non-BAU mortality releases). Capital generation is
Solvency II operational surplus generation. Dividends are on a
declared basis. Assumes a flat final 2020 dividend, and 3-6% annual
growth thereafter.
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