Legal & General Group Plc (LON:LGEN) has shared 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. 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
Legal & General 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.
