Legal & General Group (LGEN) CME 2024 summary

Strategic vision and business model

• Announced a vision for a simpler, more synergistic, and capital-light group focused on three core businesses: Institutional Retirement, Asset Management (combining LGIM and LGC), and Retail, each positioned for sustainable growth over the next five years.

• Asset Management and L&G Capital are being combined to create a single global asset manager, aiming to increase fee-based, capital-light earnings and improve profitability, especially in private markets.

• A new Corporate Investments unit will manage non-strategic assets, with a focus on maximizing shareholder value through potential sales or retention.

• Capital allocation will be governed by a new framework with five filters, including strategic fit, synergies, profitability (with a 14% return on capital hurdle), earnings contribution, and risk appetite.

• Emphasizing disciplined execution, digital transformation, and breaking down divisional silos for improved collaboration.

Financial guidance and targets

• Set new three-year group financial targets: 6%-9% annual growth in core EPS, minimum 20% operating return on equity, and £5-6 billion cumulative Solvency II capital generation by 2027.

• Dividend per share to grow 5% in 2024, then 2% per annum, with additional capital returned via buybacks to exceed the equivalent of 5% annual dividend growth.

• Operating profit from non-strategic Corporate Investments will be excluded from core operating EPS.

• Balance sheet remains strong with a 224% Solvency II coverage ratio and debt leverage below 30%, providing flexibility for growth and capital returns.

• Management actions and surplus generation are included in OSG targets, with a focus on sustainable capital distribution and investment for growth.

Business line priorities and growth plans

• Institutional Retirement targets £50-65 billion of UK PRT over five years at a strain below 4%, with 5%-7% annual operating profit growth and significant international expansion opportunities, especially in the US, Canada, and the Netherlands.

• Asset Management aims to grow private markets AUM from £48 billion to over £85 billion by 2028, increase annual net new revenues by £100-150 million, and deliver £500-600 million in operating profit.

• Retail expects 6%-8% compound annual growth in operating profit, leveraging workplace DC market leadership and targeting £40-50 billion net flows by 2028.

• Technology, data, and AI are being deployed to drive efficiency, digital engagement, and cost reduction, supported by a new transformation office.

• Leadership changes include a global search for a new Asset Management CEO and appointment of Laura Mason as CEO of Private Markets.