FIXED INCOME INVESTOR ROADSHOW

Transcription

1 FIXED INCOME INVESTOR ROADSHOW A PRESENTATION FROM LEGAL & GENERAL June 2014 IMPROVING PEOPLE S LIVES

2 2 INVESTMENT THESIS. Proactive capital management strategy to complement long term business model Proven sustainable profitability and progressive cash flow generation in our established markets Well positioned to benefit from ageing populations, digital lifestyles and welfare reforms in the UK Experienced management team, well placed to deliver long-term objectives Strong balance sheet and very strong capital position First capital markets issuance since 2009 The proposed issue underpins L&G s long term strategy to maintain a strong and efficient capital structure

3 BUSINESS UPDATE.

4 4 FINANCIAL HIGHLIGHTS. 1. Net cash generation up 16% to 1,002m (: 865m) 2. Operational cash generation up 9% to 1,042m (: 958m) 3. Operating profit up 7% to 1,158m (: 1,087m) 4. Profit before tax up 10% to 1,134m (: 1,033m) 5. Profit after tax up 12% to 896m (: 798m) 6. Earnings per share up 10% to 15.20p (: 13.84p) 7. Return on equity 16.1% (: 15.4%) 8. Full year dividend up 22% to 9.30p per share (: 7.65p per share) 9. Net cash dividend cover 1.8 times (: 1.9 times)

5 5 STRATEGIC & FINANCIAL EVOLUTION. STRATEGIC PROGRESS 2009 AND ONGOING AND BEYOND CASH: CERTAINTY AND SUSTAINABILITY CASH + ORGANIC GROWTH CASH + ORGANIC GROWTH + SELECTIVE ACQUISITONS Identification of five key macro Industrialised and automated drivers of growth processes Banks and governments Cost of new business reduced excessive leverage create Capital efficiency increased white spaces to expand into No burning platforms One firm with shared culture, ORGANISATIONAL beliefs, values PROGRESS Every Day Matters Net cash: 213% growth : 1,002m 2008: 320m OUTCOMES Dividend: 129% growth : 9.30p 2008: 4.06p Cost of dividend 550m * As at Q Continue to accelerate growth in flow to annuities, direct investment and LGIM Six bolt on acquisitions Measured international expansion Increased digital capability Expansion of key roles improving talent Strengthening our social purpose Five major profit centres in our new operational structure Becoming a destination for talent UK Individual annuities up 26% UK Protection up 25% US Protection up 28% Direct investments 1.4bn Workplace net inflows 1.6bn Return on equity 15.4% LGIM International AUM: 63bn* Cofunds AUA: 66bn* US Protection sales up 12%* Direct investments of 1bn* 1.5 times target dividend cover Return on equity 16.1%

6 6 CLEAR STRATEGY, OUTSTANDING RESULTS. PROGRESS Q ACHIEVEMENTS GROWTH DRIVERS GROUP RESPONSE AGEING POPULATIONS RETIREMENT SOLUTIONS DIGITAL LIFESTYLES DIGITAL SOLUTIONS WELFARE REFORMS PROTECTION UK Protection premiums up 9% to 353m France Group Protection sales up 38% to 40m HOMOGENOUS ASSET MARKETS LGIM INTERNATIONAL 63.2bn LGIM International AUM: 21% growth Acquisition of Global Index Advisors completed in May 2014 RETRENCHING BANKS DIRECT INVESTMENT Portfolio more than doubled to 2.9bn in with further 1.0bn direct investment in Q Annuity assets up 15% to 38.3bn Record 3bn BPA deal for ICI Pension Fund Workplace assets up 32% to 9.1bn Cofunds assets of 65.6bn GI direct: Market leading

7 7 OUR BUSINESSES. Legal & General Assurance Society (LGAS): Legal & General Retirement (LGR): With over 6m individual customers and 2m group customers our three main areas are corporate (group pensions and group protection), retail savings (individual pensions, platforms and financial advice) and protection (life protection and general insurance) With around 1m customers, our retail business helps turn customers pension savings into lifelong retirement income and our corporate business helps defined benefit pension schemes manage their annuity liabilities LGAS 33% LGR MD: Kerrigan Procter LGAS CEO: John Pollock 444m LGR 23% 310m Legal & General America (LGA): We re successfully building scale in the US. We offer life insurance plans to individuals with a focus on underwriting expertise and excellence in customer service. We re a top three US term life insurer with over 1m customers 1.3bn* LGA 7% LGA CEO: Jimmy Atkins 92m 179m 304m LGC 14% Legal & General Capital (LGC): LGIM 23% Legal & General Management (LGIM): Investment Our core purpose is increasing the returns on the Group s principal balance sheet. We focus on improving returns through direct investments whilst ensuring we have enough capital to withstand tough market conditions Our global asset management business manages investments on behalf of institutional and retail customers. We ve a broad range of fund management services and are the largest manager of UK pension fund assets LGC MD: Paul Stanworth LGIM CEO: Mark Zinkula * Total operating profit before tax from divisions Source: Annual Report and Accounts

8 8 STRONG DELIVERY ON ALL KEY METRICS. GROWTH LGIM external net flows ( bn) % Annuity premiums ( bn) % Savings net inflows ( bn) n/a Insurance gross premiums ( bn) % US Protection gross premiums ($bn) % Net cash generation ( m) 1, % Operating profit ( m) 1,158 1,087 7% Profit before tax ( m) 1,134 1,033 10% Earnings per share (pence) % EEV per share (pence) % IGD surplus ( bn) IGD coverage ratio (%) Return on equity (%) m GROWTH EARNINGS CAPITAL

9 9 DRIVING GROWTH: INCREASING STOCK. 463bn LGIM AUM GROWTH 450bn INSURANCE PREMIUMS GROWTH 2.8bn 354bn 2.1bn ANNUITIES ASSETS GROWTH Q Q bn UK SAVINGS ASSETS GROWTH 113bn 34.4bn 115bn Cofunds Cofunds Q1 Q bn 25.4bn Q Q

10 10 NET CASH: INCREASING STOCK DRIVES GROWTH. OPERATING CASH GROWTH NET CASH GROWTH 1,042m 1,002m increases from all areas: 840m 760m Retail Protection: Strong H2 volumes; extending market leading position NET CASH GROWTH FROM ALL DIVISIONS IN GI: Excellent combined operating ratio; benefitting from benign weather and operational efficiencies. 1,000m L&G Retirement: Step change in new business volumes; disciplined pricing. 950m LGIM: Increasing scale, international expansion and efficient cost base. 900m 850m FY LGAS LGR LGIM LGC LGA Group and Other FY L&G Capital: Selective direct investments delivering superior returns.

11 11 CAPITAL BEING DEPLOYED WHILST MAINTAINING BALANCE SHEET STRENGTH. Comfortable with IGD coverage reducing but remaining within preferred 175% - 225% range, over the longer term. Capital deployed on organic and non-organic growth opportunities in areas of strategic focus: + 1.0bn Net cash (0.1)bn (0.6)bn (0.3)bn (0.1)bn (0.1)bn Dividends M&A Organic Growth Other capital movements IGD surplus movement

12 12 HOW WE USE CAPITAL AND CASH. New Business Strain 40m Existing business stock CASH FLOW Operational Cash Generation 1,042m Net cash less dividends 452m M&A Business Start Up Capital stock 1 January Net cash Dividends M&A Organic growth Other adjustments 31 December Dividend 550m bn (0.6) (0.3) (0.1) (0.1) 4.0 ORGANIC GROWTH CAPITAL NB Capital required (0.3)bn EB Capital release 0.2bn We believe that the worst case Solvency II scenarios have been avoided. We currently anticipate that our Solvency II capital surplus will be no lower than our Solvency I IGD capital surplus.

13 13 ACQUISITIONS - CLEAR STRATEGY, OUTSTANDING RESULTS. GROUP RESPONSE PROGRESS IMPLEMENTED SO FAR NEXT STEPSPROGRESS RETIREMENT SOLUTIONS Acquired Lucida for 149m in Expect return of c 140m capital by end 2014 Fully integrated on L&G systems no property or people costs Evaluate opportunities in US and Canada Monitor UK market for opportunities following Budget DIGITAL SOLUTIONS Acquired 75% of Cofunds for 131m in Budget announcements significantly increase potential Increased to 95% share of the Idol in Continue to monitor and evaluate new and emerging technologies Opportunities leading to potential distribution cost reductions attractive Considered several UK opportunities none met our criteria Financially disciplined approach Home (GI) remains attractive Evaluate technology businesses Acquired GIA for $30m-$50m in 2014 Increased US assets by c$21bn Continue to evaluate US and UK opportunities Substantial consolidation of industry in Europe Acquired 46% share of Cala Homes for 65m in Mar Acquisition of Banner Homes 2014 Further landbank development Target IPO of Cala in UK market remains attractive PROTECTION LGIM INTERNATIONAL DIRECT INVESTMENT

14 ACTION PLAN. DIVISIONS OPERATING CASH m 2014 OPERATING CASH GUIDANCE m Increase net flows: : 0.6bn, : 2.1bn, Q already 2.8bn Reduce unit costs. Improve risk adjusted yield Continue to diversify sources of profit: international and enhanced Increase longevity transactions LGR 260 LGIM 239 Improve performance in UK retail and DC Accelerate international growth: organic and acquisitions Accelerate external net flows : 5.3bn, : 9.3bn LGAS* 421 Reduce operating costs in all areas Maintain GI momentum Halve Workplace losses from (29)m Improve digital profit performance and increase capability LGC 137 Improve risk adjusted yield Retain 1.5bn equity position Active portfolio management via purchase and disposal of investments LGA 44 Improve risk adjusted yield and unit costs Continue to grow dividends at 10% per annum LGAS GI 53 Group debt & other expenses (112) New business strain (40) NET CASH c KEY ACTIONS c.430 c.45 1,002 * LGAS actual operating cash and cash guidance excludes General Insurance. DIVIDEND POLICY Assuming we continue to anticipate a Solvency II surplus being no lower than Solvency 1, we expect over the next two years to reduce our net cash coverage of dividend towards 1.5 times. We will provide dividend guidance for subsequent years when Solvency II clarity has emerged. The Board remains committed to a progressive dividend policy over the long term.

15 PROPOSED OFFERING.

16 16 SUMMARY OVERVIEW OF TERMS & CONDITIONS Issuer Legal & General Group Plc (the Issuer ) Instrument []m Fixed Rate Reset Subordinated Notes due 2064 (the Notes ) Interest []% p.a. payable semi-annually in arrear to [] 2044 Reset to 5yr Gilt + initial credit spread of [] bps + step-up margin of 100bps on [] 2044 and every 5 years thereafter, payable semi-annually in arrear to [] 2064 Status / Subordination The Notes constitute direct, unsecured and subordinated obligations of the Issuer and rank: (i) pari passu and without any preference among themselves; (ii) at least pari passu with all other obligations of the Issuer which constitute (or would but for any applicable limitation on the amount of such capital constitute) Lower Tier 2 Capital ( Pari Passu Securities ); and (ii) in priority to the claims of holders of Existing Undated Tier 2 Securities, all obligations of the Issuer which constitute (or would but for any applicable limitation on the amount of such capital constitute) Tier 1 Capital (including, without limitation, by virtue of the operation of any grandfathering provisions under any Relevant Rules) and all classes of share capital of the Issuer ( Junior Securities ) Solvency Condition Final Maturity Date All payments are conditional on the Issuer being solvent at the time of payment and no amount shall be payable unless and until such time as the Issuer could make such payment and still be solvent immediately thereafter [] 2064 (50 year initial term), subject to no Regulatory Deficiency Redemption Deferral Event Optional Redemption Dates [] 2044 (30 years from issuance) and each subsequent interest payment date thereafter, subject to regulatory approval Special Event Redemption / Substitution / Variation In case of a Tax Law Change (causing either loss of deductibility or a requirement to gross up for withholding tax), Capital Disqualification Event (loss of regulatory capital treatment) or a Rating Methodology Event (material reduction in rating agency equity credit), the Issuer may redeem the Notes at par, or substitute or vary the terms of the Notes to remedy such event (provided the resulting notes have terms not materially less favourable to an investor than the terms of the existing notes and comply with Tier 2 regulatory requirements and, in the case of a Rating Methodology Event, rating agency equity credit criteria), subject to regulatory approval and in the case of redemption prior to year 5, subject to prior replacement with like or better capital. The Notes may not be redeemed following a Rating Methodology Event within five years of the Issue Date Redemption Deferral Optional Interest Deferral If the Solvency Capital Requirement ( SCR ) with respect to the Issuer, the Group or any other insurance undertaking in the Group is breached or if redemption would result in a breach of the SCR, redemption will be deferred until such event has been remedied, unless the PRA has agreed to the redemption or the Issuer is wound up Interest may be deferred at the Issuer s discretion on any interest payment date other than a Compulsory Interest Payment Date or a Mandatory Interest Deferral Date. Interest deferred is cash cumulative, but not compounding and must be settled on resumption of payment of interest on the Notes, redemption or repurchase, or winding up Compulsory Interest Payment Date (Dividend Pusher) Means any interest payment date: (i) in respect of which a Compulsory Interest Payment Event has occurred in the six months prior to such date; (ii) where the Solvency Condition is satisfied; and (iii) which is not a Mandatory Interest Deferral Date Compulsory Interest Payment Event means, subject to certain exceptions where the relevant payment and/or redemption is mandatory under the terms of the instrument: (i) any declaration/payment of dividend/distribution or coupon on the Issuer s ordinary shares, Junior Securities or Pari Passu Securities; or (ii) any redemption/repurchase for cash of the Issuer s ordinary shares (other than in the ordinary course of business in connection with share option/ownership schemes), Junior Securities or Pari Passu Securities Mandatory Interest Deferral Date Termination of Replacement Capital Covenant No interest payment shall be made on an interest payment date in respect of which a breach of SCR has occurred or would occur if payment is made (interest deferred is cash cumulative, but not compounding must be settled on resumption of payment on the Notes) If, subsequent to issuance, the Notes become designated as the beneficiary of the replacement capital covenant (the Covenant ) entered into in connection with the Issuer s 600m Perpetual Preferred Callable Capital Securities, issued on 2 May 2007, the holders of the Notes will be deemed to immediately consent to termination of the Covenant and shall not be entitled to the benefit of the Covenant Expected Instrument Rating [Baa1/BBB+] Use of Proceeds The net proceeds of the issue of the Notes will be used for the general corporate purposes of the Group, and to strengthen further its capital base Governing Law / Listing / Denoms English / London / 100k + 1k Source: Preliminary Prospectus. This summary is for illustrative purposes only. Please refer to the Preliminary Prospectus for the legally binding terms and conditions.

17 17 STRUCTURAL COMPARISON L&G AXA Prudential Royal London Liverpool Victoria Standard Life L&G Pricing Date [] Jan Dec 22 Nov 15 May 26 Nov 16 Jul 2009 First Call Date [] Jan Dec Nov May Dec Jul 2021 [] 2064 (soft) 16 Jan 2054 (soft) 19 Dec 2063 (soft) 30 Nov 2043 (soft) 22 May 2043 (soft) 4 Dec 2042 (soft) 23 Jul 2041 Aa3 / AA- / AA- Aa3 / A+ / AA- Aa2 / AA / AA A2 / A / NR NR / BBB+ / NR A1 / A+ / NR Aa3 / AA- / AA- Issue Rating* [Baa1] / [BBB+] / NR A3 / BBB / BBB A3 / A- / BBB+ Baa1 / BBB+ / NR NR / BBB- / NR Baa2 / BBB / BBB- Baa1 / BBB+ / BBB Size / Coupon GBP []m / []% semi-annually GBP 750m / 5.625% annually GBP 700m / 5.700% semi-annually GBP 400m / 6.125% annually GBP 350m 6.500% annually GBP500m 5.500% semi-annually GBP 300m / 10% semi-annually Maturity Financial Strength Rating* Step-up / Reset Denomination 100bp in year 30 / 5-year UKG + [ ]bp 100k / 1k Optional Deferral At issuer s discretion, subject to dividend pusher Mandatory Deferral Breach of solvency condition or Solvency Capital Requirement (Solvency II) Nature of Deferral Cumulative Capital Disqualification Call Rating Agency Call Liquidation Ranking 100bp in year 20 / 100bp in year 30 / 100bp in year 10 / 3-month Libor + 327bp 5-year UKG bp 5-year UKG bp 100k / 1k At issuer s discretion, subject to dividend pusher 100bp in year 10 / 5-year UKG + 563bp 100bp in year 10 / 300bp in year 10 / 5-year UKG + 485bp 5-year UKG bp 100k / 1k 100k / 1k 100k / 1k 100k / 1k 50k / 1k At issuer s discretion, subject to dividend pusher At issuer s discretion, activates stopper on mutual bonus payments At issuer s discretion, activates stopper on mutual bonus payments At issuer s discretion, subject to dividend pusher At issuer s discretion, subject to dividend pusher Breach of solvency Breach of solvency Breach of solvency Breach of solvency Breach of solvency condition or Solvency condition or Solvency condition or Solvency condition or Solvency condition or Solvency Capital Requirement Capital Requirement Capital Requirement Capital Requirement Capital Requirement (Solvency II) or (Solvency II) or (Solvency II) or (Solvency II) or (Solvency II) regulatory requirement regulatory requirement regulatory requirement regulatory requirement Cumulative Par upon full Par upon full or partial disqualification from disqualification from capital or less than capital or less than 100% grandfathering 100% grandfathering Breach of solvency condition Cumulative Cumulative Cumulative Cumulative Cumulative Par upon full disqualification from capital or less than 100% grandfathering Par upon full disqualification from capital or less than 100% grandfathering Par upon full disqualification from capital or less than 100% grandfathering Par upon notes no longer being eligible as applicable capital N/A Par from year 5 Par N/A Par from year 5 Par from year 5 Par N/A Subordinated to all senior debt Subordinated to all senior debt Subordinated to all senior debt Subordinated to all senior debt Subordinated to all senior debt Subordinated to all senior debt Subordinated to all senior debt * Moody s / S&P / Fitch; Operating company Insurer Financial Strength Rating (IFSR) or equivalent; Guarantor ratings used where different from issuer Source: Preliminary Prospectus, relevant offering documents, Joint Lead Managers.This summary is for illustrative purposes only. Please refer to the Terms & Conditions in the Preliminary Prospectus and relevant offering documents

18 18 CREDIT RATINGS Rating Type Financial Strength Rating Issue Credit Rating Outlook Entity / Instrument S&P Moody s L&G Assurance Society Ltd AA- Aa3 Senior Debt A A3 Tier 2 BBB+ Baa1 Tier 1 BBB+ Baa2 - Stable Negative

19 19 DEBT PROFILE 1bn undrawn bank credit facility Proposed new benchmark offering Issue Date Issuer Status Rating First Call Currency Amount Coupon (Moody s / S&P) Date Maturity Date Jun 05 Legal & General Group Plc Lower Tier 2 Baa1 / BBB+ EUR June 2015 June 2025 Apr 07 Legal & General Group Plc Tier 1 Baa2 / BBB+ GBP May 2017 Perpetual Mar 04 Legal & General Group Plc Upper Tier 2 Baa1 / BBB+ GBP April 2019 Perpetual Jul 09 Legal & General Group Plc Lower Tier 2 Baa1 / BBB+ GBP July 2021 July 2041 Nov 00 Legal & General Finance PLC Senior A3 / A GBP December 2031 Mar 02 Legal & General Finance PLC Senior A3 / A GBP April 2033 Notes: Legal & General outstanding debt and capital instruments greater than 100m equivalent. Maturity date shown as the earliest of first call date and maturity. Nominal values shown, with EUR-GBP exchange rate at (Source: Bloomberg, as of year end) Source: Joint Lead Managers

20 APPENDIX 1.

21 21 BIOGRAPHIES Mark Gregory was appointed as Group Chief Financial Officer on 1 July. Mark joined Legal & General in 1998 from Asda Group Plc where he held both senior finance and business development roles. He has undertaken a variety of divisional finance and business director roles at Legal & General including Financial Director (Retail), Group Financial Controller, Communications and Resources Director, Resources and International Director, UK Services Operations Director and Managing Director of With Profits. Mark was appointed as Chief Executive Officer of the Savings business and a director of the Board in January Mark Gregory Chief Financial Officer Mark is a qualified chartered accountant. Paul is Managing Director of LGC having joined in 2009 to manage the investment strategy for the Annuity Funds. Since then Paul has built up the principal investment function in L&G to include Treasury, With-Profits, Shareholder Funds and our International businesses. Latterly the Direct Investment opportunity has become key with a core function established and LGV moving into LGC in. Previously Paul was a Managing Director at Merrill Lynch providing capital market solutions to UK insurers using derivatives, cash assets and securitisation. Paul had similar roles at Deutsche Bank and RBS. Paul s early career was in fund management at M&G, managing the corporate bond portfolios of the Prudential and developing the new business investment strategies. Paul Stanworth Managing Director, LGC Paul has a B.Sc. from UCL, London University and is a Fellow of the Institute of Actuaries. Frank has been with Legal & General for 3 years, and was promoted to Group Treasurer in December. He has 20 years experience in Treasury & Global Markets spanning Treasury, Fixed Income, Derivatives & Equities; 18 years with HSBC Global Markets and 2 years with ANZ. Frank's career started in the UK and he has worked extensively across Asia, Dubai and Saudi Arabia. Frank qualified as a Fellow of the Institute of Actuaries. Frank Turley Group Treasurer

22 APPENDIX 2.

23 23 LEGAL & GENERAL RETIREMENT L&G RETIREMENT: GROWTH WITH DIVERSITY. Operational cash generation New business surplus Net cash generation Operating profit Individual single premiums 1,277 1,320 Bulk single premiums 2,812 1,019 Total single premiums 4,089 2,339 Longevity annual premiums Individual assets ( bn) Bulk assets ( bn) Total assets Assets net inflows ( bn) Annuities EEV margin (%) Q1 2014: Secured the largest ever UK Bulk Annuity contract with ICI Pension Fund covering 3bn of the Fund s liabilities. Total annuity assets increased to 38.3bn, reflecting record net inflows of 2.8bn for Q BUSINESS MIX AND SCALE APE ( m) FINANCIAL HIGHLIGHTS m Q Bulk Individual LONGEVITY MARKET SHARE Rest of market Legal & General 44% 56% Source:

24 24 LEGAL & GENERAL RETIREMENT ALL BASES COVERED. OUR APPETITE FOUR LEVERS OF GROWTH LEGAL & GENERAL S DISTINCTIVE PROPOSITION UK INDIVIDUAL RETIREMENT SOLUTIONS Wide range of new and existing products for customers deciding how to convert savings into retirement income UK BULK ANNUITIES Unique link to LGIM s client base (c.20% of UK DB assets) Clear synergies with LDI de-risking to buy-out LONGEVITY INSURANCE INTERNATIONAL ANNUITIES Twice the benefit: Complements LDI expertise Step towards buy-in / buy-out Potential for International expansion into the broader US pension de-risking market, facilitated by: Existing UK longevity skills LGIM America s LDI and investment skills

25 LEGAL & GENERAL RETIREMENT 25 DIVERSIFIED BUSINESSES FOR A MODERN PENSIONS MARKET: PRO-CHOICE AND PROCONSUMER. Industry developments and Budget reforms welcomed: the changes will be good for customers and L&G BPA volumes to more than offset individual annuity reductions Size of private sector UK DB liabilities market estimated at c. 1.8 trillion 1 on a buy-out basis, so expect demand for BPA to increase over time Agnostic on outcome of DB to DC transfer consultation as none of the five options are likely to materially affect the BPA market. DB schemes are likely to find de-risking solutions more affordable if significant transfers occur BPA market is very different to Individual annuities: requiring a strong and sustained track record, a robust capital base and specialist expertise across longevity, investment management and asset transitioning. L&G has all these competitive advantages, built up over 27 years and is a market leader in this field Ideally placed to provide alternative solutions to annuities L&G s established mass market distribution combined with expertise in both investment and longevity management means a wide offering of new and existing products to customers converting savings into retirement income Developing low cost income drawdown products with a range of options for customers to choose how much risk they wish to take and how much they want to be guaranteed Savings level will increase Pension savings more attractive now and together with the higher ISA limits, will mean higher rates of saving. L&G s market leading Workplace savings products, comprehensive suite of low cost retail solutions including unit trust and ISA businesses and the largest retail savings platform in Cofunds positioned to meet the demand L&G to benefit from the recently announced 75bps cap for auto-enrolment default funds as our auto-enrolment default fund already operates with a maximum 50bps charge 1 The Purple Book: PPF / The Pensions Regulator November on a full buy-out basis.

26 26 LEGAL & GENERAL INVESTMENT MANAGEMENT LGIM: ROBUST BUSINESS MODEL DELIVERING SUCCESS. FINANCIAL HIGHLIGHTS m Total revenue (290) (261) Operating profit Net cash generation Cost:income ratio (%) External gross inflows ( bn) External net inflows ( bn) of which international ( bn) of which retail ( bn) 0.4 (1.9) ASSET SCALE bn Closing AUM Total costs DC ASSETS UNDER MANAGEMENT 31bn 17bn INTERNATIONAL SALES 15.7bn Persistency (%) of which international 2.6bn 2.3bn Q1 2014

27 27 LEGAL & GENERAL INVESTMENT MANAGEMENT DELIVERING INTERNATIONAL EXPANSION. 63bn INTERNATIONAL AUM 59bn Q1 2014: International AUM now total 63.2bn up 21% on Q1 ( 52.4bn) US: Record net inflows of $7.8bn in as we approach critical mass in the region. We have a healthy pipeline of fixed income and LDI mandates. 23bn Gulf: Strong net inflows of 4bn in. We now manage 17bn of assets on behalf of clients in the region with continued momentum for both index and property products. INTERNATIONAL AUM BY REGION - Europe: Record year with sales of 7bn from the region. We successfully launched our first SICAV funds in November. 0.3bn 19bn 23bn Asia: LGIM Asia is actively marketing across the region after receiving its Type 1 licence. Significant interest in our index and fixed income capabilities. 17bn US Gulf Europe As ia

28 28 LEGAL & GENERAL INVESTMENT MANAGEMENT A RAPIDLY GROWING US MARKET. Consistent strong growth with net inflows of $7.8bn in. LGIMA GROWTH ASSETS Managing assets on behalf of four of the 10 largest corporate pension schemes in the US. $54bn Performance remains strong with all our composites outperforming their benchmarks. Acquisition of Global Index Advisors, Inc. provides significant potential to grow DC assets in the US. $38bn $16bn US companies and consultants increasingly looking to leverage our differentiated LDI capability. Expanding capabilities and product range with plans to enter the US index market in LGIMA GIA Note: The proforma assets of $54bn include $16bn of GIA advised assets, reflecting the acquisition of GIA in 2014.

29 29 LEGAL & GENERAL INVESTMENT MANAGEMENT SERVING THE EVOLVING NEEDS OF THE UK MARKET. DC AND RETAIL AUM 31bn DB AUM 268bn 205bn 19bn 17bn 14bn LGIM Retail DC Passive Active and LDI UK net outflows driven by the maturing DB market but clients desire to de-risk remains strong with flows of 7bn into our LDI strategies. Enhanced DC proposition, building on existing significant market share as the DC market grows. Indexed funds benefiting from RDR and partnerships with fund platforms. Repositioning our active equity strategies and strengthened our multi asset capabilities.

30 30 LEGAL & GENERAL INVESTMENT MANAGEMENT HARNESSING THE POWER OF THE L&G GROUP. Retail investments integration into LGIM is progressing well. We are enhancing our proposition, aligning it with our institutional capabilities. LGIM working closely with L&G Capital to complete direct investments with over 1bn originated in. LGIM received over 1bn of net flows from DC clients using the Workplace Savings platform in. LGIM and Retirement are forging stronger links to deliver solutions for existing clients seeking to insure their longevity risk. DELIVERING SYNERGIES GROUPWIDE PROTECTION AND SAVINGS (LGAS / LGA) Working closely to support LGAS DC proposition Increased allocation to LGIM products Leverage investment expertise INVESTMENTS (LGIM / LGI) Leverage investment expertise and seed products Enhanced direct investment capability CAPITAL (LGC) RETIREMENT (LGR) LGIM support clients migrating to buy-out

31 31 LEGAL & GENERAL ASSURANCE SOCIETY LGAS: SCALE AND CHANGE DRIVING EFFICIENCY. UK market leader in protection and savings platforms with over 6 million individual customers and over 8,000 corporate schemes. UK PROTECTION GWP 1.3bn 1.1bn 353m Operational cash generation New business strain (73) (107) Net cash generation Operating profit Insurance gross premiums 1,923 1,823 Protection EEV margin (%) Savings assets ( bn) Savings net flows ( bn) General Insurance GWP General Insurance combined ratio (%) UK SAVINGS ASSETS 113bn 115bn Cofunds Cofunds FINANCIAL HIGHLIGHTS m Q Q bn

32 LEGAL & GENERAL ASSURANCE SOCIETY ALIGNED TO GROWTH DRIVERS. RETIREMENT SOLUTIONS PROTECTION Workplace Savings net inflows 1.5bn, total assets 8.7bn. 0.9m customers now able to benefit from our 50bps charge cap. Suffolk Life net inflows 0.9bn, total assets 6.6bn. Protection business: net cash more than doubled over four years to 295m. GI GWP growth 7% with operating profit up to 69m, benefitting from benign weather, improved pricing and claims processes. Protection Review s Organisation of the Decade. DIGITAL SOLUTIONS Savings platforms net inflows 7.9bn, total assets 64.1bn. Retail protection now achieving over 80% Straight Through Processing (STP). Investment in Cofunds to drive further capability. 32

33 33 LEGAL & GENERAL ASSURANCE SOCIETY INTEGRATION: EMBEDDING CUSTOMER FOCUS. PHASE 1 PHASE 2 PHASE 3 INTEGRATION OPERATIONAL SYNERGIES CUSTOMER FOCUS COMPLETE UNDERWAY UNDERWAY PROGRESS ON INTEGRATION Annualised cost savings of 34m achieved with reduction of 400 FTE. Additional Cofunds savings on track to deliver 11m by Growth and digital investment plus tight management of mature business cost base. New management structure in place. Completed centralisation of finance, strategy, HR and risk. Sales team aligned around customer and distributor segments.

34 34 LEGAL & GENERAL ASSURANCE SOCIETY COFUNDS: GROWTH ENGINE. FORECAST PLATFORM GROWTH TO FOCUS Years of under-investment need addressing to improve profitability. Cost effective delivery of regulatory change. Delivery of integration synergies. Efficient delivery of enhanced platform proposition for all customers. 1,400 1,200 1, Fund selection Attractive Legal & General fund pricing Fund solutions Products Distribution Greater range of offerings to wider distribution channels. Large range of risk targeted multi-asset tracker funds. Realistic Pessimistic Optimistic Source: Fundscape Platform Report Q4. IPS GROWTH 8.2bn Improved pension proposition. Protection and annuity offerings. Full offering to bancassurance partners. 0.5bn Extend reach Re-launched non-advised proposition

35 35 LEGAL & GENERAL ASSURANCE SOCIETY INSURANCE: PERFORMING FOR CUSTOMERS. 100% 80% 60% SETTLEMENT OF STORM CLAIMS AGAINST WEEKS 40% 20% Exceptional year for GI profit, benefiting from benign weather, improved pricing and claims processes. Settlement costs lower than natural market share. 60% of storm claims settled within four weeks in reflecting improved claims handling. COR 84%, operating profit 69m after floods. 0% Storm Events 2011/12 Development of Storm Events (Oct 13 - Dec 13) 81% 78% 74% STRAIGHT THROUGH PROCESSING RATE 58% Protection efficiencies STP rate over 80%. LG Network facilitated around 1 in 6 of UK mortgages, 28bn of mortgages. Forecast of 11%(*) growth in gross mortgage advances for % * Source: Council of Mortgage Lenders

36 36 LEGAL & GENERAL ASSURANCE SOCIETY FOCUS ON CORPORATE CUSTOMERS. WORKPLACE ASSETS GROWTH 8.7bn 3.8bn 2011 WORKPLACE REGULAR PREMIUM GROWTH 0.6bn OPERATIONAL SCALE Workplace Savings: Over 900,000 members (: 381,000). Group Protection: 3,300 companies with 1.9 million members. Workplace Savings: 50% reduction in unit costs over two years. 1.2bn CORPORATE SYNERGIES Shared clients: Assets 3bn; GWP 60m. 5m Group Protection new business from existing pensions clients and 250m pensions new business from common clients. Integrated operational management structure.

37 37 LEGAL & GENERAL ASSURANCE SOCIETY STRATEGIC VISION. OPPORTUNITIES LGAS RESPONSE WORKPLACE SAVINGS LOSSES DRIVE SCALE GEARED GROWTH AND PROFITABILITY GROUPWIDE SYNERGIES LGIM, RETIREMENT COFUNDS CAPABILITY AT THE CORE OF RETAIL SAVINGS INVESTMENT IN PLATFORM EASE OF CUSTOMER INTERACTION HIGH GROWTH, PROFIT ENGINE H DRIVE DIGITAL ENGAGEMENT DELIVER SYNERGY BENEFITS IN CORPORATE SPACE MAINTAIN MARKET LEADING POSITION RESPOND TO GROWING ADVICE GAP INFORM GUIDE EXECUTE MATURE BUSINESS RUN-OFF PROACTIVE COST MANAGEMENT MAINTAIN MARGINS MANAGE IMPACT OF RUN-OFF ON PROFIT AND CASH LEVERAGE PROTECTION FOOTPRINT

38 38 LEGAL & GENERAL CAPITAL DIRECT INVESTMENTS GROWTH L&G CAPITAL: IMPROVING RETURNS. FINANCIAL HIGHLIGHTS m Operating profit Net cash generation Group investment variance 29 (23) 2.9bn 0.6bn LGR LGC ASSET PORTFOLIO bn LGR LGC BALANCE TOTAL Sovereign Banks Other bonds Property Equities Derivatives Cash and cash equivalents Total Asset Portfolio Total Direct investments Bonds: LGA

39 39 LEGAL & GENERAL AMERICA L&G AMERICA: GROWING CASH. FINANCIAL HIGHLIGHTS US $m Net cash generation US PROTECTION GWP $269m Operating profit APE US PROTECTION DIVIDEND PROGRESSION $69m Term assurance premiums Universal life premiums , $58m TOTAL GROSS WRITTEN PREMIUMS 2011 Note: Ordinary dividends of $73m were paid in February 2014.

40 APPENDIX 3.

41 41 CREDIT DRIVERS Credit Strengths Moody s (Source: Moody s Investor Service, Credit Opinion, 3 April 2014) S&P (Source: Standard and Poor s Ratings Service, Ratings Direct, Credit Opinion, 27 May 2014) Credit Challenges Excellent brand in the UK life and savings market. New business margins continue to be market leading in the UK life market. Strong financial flexibility due to conservative approach to group borrowing. The Legal & General group (L&G) has one of the most favorable business risk profiles in the U.K. life sector because of its expertise across products, its multichannel distribution model, high-quality retail product range, marketleading risk and asset management operations, and respected brand. S&P expect this diversity to enable L&G to continue to adapt and be successful, despite ongoing developments within the U.K. life insurance sector. Very strong business risk profile and very strong financial risk profile. Capital and earnings are assessed as very strong and S&P expect earnings to be sufficient to fund the Group's higher dividend payout plans and growth strategy. Proven access to the capital markets and favorable debt servicing ratios support strong assessment of financial flexibility. Standard & Poor's Ratings Services views management and governance and enterprise risk management (ERM) as neutral rating factors and liquidity as exceptional. Challenge Mitigants Political and regulatory headwinds facing the UK life industry. Limited geographic and business line diversification due to its focus on the UK life market. High proportion of investments in equities and properties in the with profit fund, although partially mitigated by product design and hedging which both limit the impact on shareholders capital. Significant exposure to longevity risk. Our assessment of L&G's business risk profile is constrained by its relative concentration in a single market, namely the U.K. The quality of the group's capital is a constraint given that available capital includes relatively sizable proportions of value in force and hybrid instruments. A broad product offering A diversified retirement solutions business. A strong track record, a strong capital base and specialist expertise across longevity, investment management and asset transitioning. Investment management strength and a comprehensive suite of good value, capital-light individual retirement solutions.

42 42 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 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 acquisition or combinations within relevant industries. As a result, Legal & General Group 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 Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.

43 IMPROVING PEOPLE S LIVES