Full Year 2023
Results
Set to achieve our 5 year
ambitions, with record new business volumes and resilient in-year
profit generation
António Simões,
CEO
"Everything I have seen since
joining the business in January has confirmed what attracted me to
Legal & General. We have an authentic sense of purpose
and stand out for our market-leading businesses, performance track
record and strong balance sheet, delivered by talented
colleagues.
Our 2023 performance reflects
these strengths. We are on course to achieve our five-year
targets, and demonstrated resilience in challenging markets to
achieve record new business volumes in pension risk transfer, UK
annuities and US protection, increasing our store of future profit.
Our international assets under management and alternative
assets portfolio continue to grow, as does our position in the UK
defined contribution pensions market.
We must be as ambitious for Legal
& General's future as we are proud of our history. This
is the right moment to take a fresh perspective, build on our track
record and set out a vision for profitable and sustainable growth.
I look forward to outlining our strategy and plans at our
Capital Markets Event on 12 June."
Resilient financial
performance1
·
Operating
profit of £1,667m (2022:
£1,663m)
·
Profit after
tax2 of £457m (2022:
£783m)
·
Solvency II
capital generation of £1.8bn (2022:
£1.8bn)
·
Solvency II
coverage ratio3 of 224%, with surplus of
£9.2bn (2022: 236%,
£9.9bn)
·
Dividend per
share of 20.34p, up 5% (2022:
19.37p)
Growth in our store of future
profit: up 9% to £14.7bn4
·
Record volumes
across our insurance businesses:
‒ £13.7bn of
institutional annuities (£10.5bn retained premium5)
‒ £1.4bn of
individual annuities
‒ $175m of US
protection new business premium
·
New business CSM
contributed £1.2bn (2022:
£0.9bn)
·
CSM has grown 9%
to £13.0bn (2022:
£11.9bn)
Set to achieve our five-year
(2020-2024) ambitions
·
Cumulative
Solvency II capital generation of £6.8bn (£8-9bn by 2024)
·
Cumulative
dividends declared of £4.5bn (£5.6-5.9bn by 2024)
·
Cumulative net
surplus generation over dividends of £0.8bn
·
The Board's
intention is to grow the dividend at 5% for the year
FY246, as previously
communicated
1. The
Group uses a number of Alternative Performance Measures (including
adjusted operating profit) to enhance understanding of the Group's
performance. These are defined in the glossary, on pages 83 to 83
of this report. IFRS 17 was introduced on 1st January 2023,
comparatives have been restated accordingly.
2. Profit
after tax attributable to equity holders.
3. Solvency II coverage ratio before the payment of 2023 final
dividend.
4. Store
of future profit refers to the gross of tax combination of
established Contractual Service Margin "CSM" and Risk Adjustment
"RA" (net of reinsurance) under IFRS
17.
5. Net
premium after deducting for funded reinsurance relating to 2023 PRT
transactions.
6. Absent
market shocks / events outside of our control.
Financial summary1
£m
|
2023
|
2022
|
Growth
(%)
|
|
|
|
|
Analysis of operating profit
|
|
|
|
Legal & General
Retirement Institutional (LGRI)
|
886
|
807
|
10
|
Retail
|
408
|
415
|
(2)
|
Legal & General Capital
(LGC)
|
510
|
509
|
-
|
Legal & General
Investment Management (LGIM)
|
274
|
340
|
(19)
|
Operating profit from divisions
|
2,078
|
2,071
|
-
|
|
|
|
|
Group debt costs
|
(212)
|
(214)
|
1
|
Group investment projects
and expenses
|
(199)
|
(194)
|
(3)
|
|
|
|
|
Operating profit
|
1,667
|
1,663
|
-
|
|
|
|
|
Investment and other
variances (incl. minority interests)
Investment variance excluding longevity and internal
pension scheme accounting2
|
(1,591)
(1,106)
|
(795)
(628)
|
(100)
(76)
|
|
|
|
|
Profit before tax attributable to equity
holders
|
76
|
868
|
(91)
|
Profit before tax excluding longevity and internal
pension scheme accounting
|
561
|
1,035
|
(46)
|
|
|
|
|
Profit after tax attributable to equity
holders
|
457
|
783
|
(42)
|
Profit after tax excluding longevity and
internal pension scheme accounting
|
848
|
927
|
(9)
|
|
|
|
|
Earnings per share (p)
|
7.35
|
12.84
|
(43)
|
Earnings per share (p) excluding longevity and internal
pension scheme accounting
|
13.96
|
15.28
|
(9)
|
Contractual Service Margin (CSM)
|
12,994
|
11,938
|
9
|
CSM (net of tax) + Book Value
|
14,720
|
14,589
|
1
|
CSM (net of tax) + Book value per share
(p)
|
246
|
244
|
1
|
|
|
|
|
Solvency II
|
|
|
|
Operational surplus
generation
|
1,821
|
1,805
|
1
|
Coverage ratio (%)
|
224
|
236
|
(12)
|
|
|
|
|
Full year dividend per share (p)
|
20.34
|
19.37
|
5
|
|
|
|
|
1. IFRS 17 was introduced on
1 January 2023, comparatives have been restated accordingly. For
further information please see Note 1.01
2. Excludes the accounting
impacts of a longevity assumption change (see page 6 and 8) and the
buyout of the L&G pension scheme (see note
3.14.iii).
2023 Financial
performance
Income statement
2023 operating performance was resilient, with operating
profit from divisions of £2,078m (2022: £2,071m).
Our business remains
well-positioned to execute on compelling
structural market opportunities to deliver
further profitable growth over the medium and long-term.
LGRI operating profit
increased by 10% to £886m (2022: £807m) underpinned by the growing
scale of back-book earnings and the consistent investment
performance of our annuity portfolio. LGRI executed record
new business volumes, addressing growing demand while maintaining
pricing discipline, writing £13,719m of
global PRT (2022: £9,541m) at a Solvency
II new business margin of 7.4%[1] in line with
our long-term expectation. This has added c£1.0bn to our store of
future profit in 2023.
Retail operating profit
decreased by 2% to 408m (2022: £415m). Whilst insurance
operating profit was up 22% (2023: £436m, 2022: £357m), driven by
ongoing profit releases in the UK and US, total operating profit was down given the lower contribution
from the Fintech businesses, as valuation uplifts from 2022 did not
repeat.
LGC operating profit was flat
against prior year earnings at £510m (2022: £509m), reflecting a good performance in a challenging
macro-economic environment for alternative assets.
In 2023, we grew our third-party managed capital
by 9% to £18.1bn (2022: £16.6bn). We remain on track to meet our
ambition of £25-30bn by 2025.
LGIM delivered operating
profit of £274m (2022: £340m), primarily
reflecting the impact of higher interest rates on the value of
assets under management: average assets under management were 12%
lower year-on-year. Despite significant inflationary impacts,
we have taken action to keep absolute costs flat.
Profit before tax attributable to equity holders, excluding
longevity and internal pension scheme accounting, was
£561m (2022: £1,035m), reflecting
investment and other variances of £(1,106)m (2022: £(628)m).
Investment variance was driven by the unrealised mark-to-market
impact of higher rates on asset valuations, the cost relating to
our announced Modular Homes closure and the write-down of our
investment in Onto.
Balance sheet and asset
portfolio
Solvency II operational surplus generation (OSG) was level at
£1,821m (2022: £1,805m). Net
surplus generation (NSG) was £1,383m (2022: £1,453m) reflecting the
impact of higher volumes of PRT business with strain levels in line
with our long-term average. The UK annuity portfolio was
self-sustaining again for the 4th year in a row, and we
continue to have optionality to further enhance profitability
through back-book asset optimisation.
Solvency II coverage ratio[2] is strong at
224% (2022: 236%).
Our IFRS return on equity[3] of 9.7% (2022: 15.6%) reflects
the impact of investment and other variances on the total result.
Looking at the result before these variances, return on
equity would be 27.1%[4] (2022: 26.9%).
We expect investment variance to average to zero over the
longer term.
Our store of future profit increased 9% to
£14.7bn (2022: £13.5bn), with CSM
up 9% to £13.0bn (2022: £11.9bn), reflecting contributions from our
growing annuity businesses and the routine longevity review in H2,
and by the Risk Adjustment (£1.7bn) up 11% from 2022
(£1.5bn).
Our diversified, actively managed annuity portfolio has
continued to perform resiliently with no defaults.
The annuity portfolio's direct investments have
received 100% of scheduled cash-flows year to date, reflecting the
high quality of our counterparty exposure.
Group Outlook
Confident in achieving our
ambitions; well-positioned to deliver long-term profitable
growth
Our strategy has delivered strong
compounding returns for our shareholders over time. It has
demonstrated resilience and positions us well to navigate the
prevailing market environment, and to deliver on our current
five-year ambitions.
Cumulatively, over the period
2020-2024, we have an ambition to generate capital of £8-9bn, with net
capital surplus generation (i.e., including new business strain) to
exceed dividends of £5.6-5.9bn.[5]
We made further progress against these ambitions in 2023 and
are set to achieve them in 2024. From the start of the ambition period to 2023, we have
achieved £6.8bn of cumulative capital generation while declaring
dividends of £4.5bn. Even with no growth in capital
generation in 2024, the cumulative capital generation would still
be comfortably within our stated ambition of £8-9bn.
We have generated cumulative net surplus
generation over dividends of £0.8bn from 2020 to date.
We remain confident in our ability
to deliver resilient, organic growth, supported by our strong
competitive positioning in attractive and growing markets.
Our confidence in our dividend paying capacity is underpinned by
the Group's strong earnings and strong balance sheet, which has
Solvency II regulatory capital of £16.6bn: a surplus of £9.2bn in
excess of a capital requirement of £7.4bn.
Business segment
outlook
Legal & General
Retirement Institutional (LGRI)
LGRI participates actively in the
global pension risk transfer (PRT) market, focusing on corporate
defined benefit (DB) pension plans in the UK, the US, Canada and
the Netherlands. Together, these markets have more than £6
trillion of pension liabilities of which c10% have transacted to
date.[6] The addressable market
therefore remains significant.
Our stated ambition for UK PRT is
to write circa £8-10bn per annum under typical market volumes.
With up to £355 billion of UK PRT demand over the next five
years anticipated and an increase in £1bn+ size individual
transactions coming to market [7], we are expecting a
period of heightened market volumes. We believe we are well
positioned to address this need and have appetite to write higher
volumes where commercial conditions support. We will continue
to be proactive in managing the capital we deploy on this business,
including use of reinsurance, to generate strong margins over
time.
We are also well-positioned to
execute internationally, having written over $7.5bn of PRT in the
US and Canada between 2020 and 2023. In 2023, we announced
our strategic relationship with Lifetri which looks to capitalise
on proposed pension reforms in the Netherlands.
Legal & General Retail
(Retail)
Our Workplace Savings business
administers one of the largest and fastest-growing UK Master
Trusts, which now has £25.4bn of AUM, and was the first commercial
Master Trust to surpass £20bn of assets under management. It
is well positioned to benefit from the
trend of consolidation in the market as well as from contributions
from existing schemes. Our focus remains on improving
efficiency and scalability as the business continues to
grow.
We expect demand for retail
annuities to remain strong, providing substantial long-term profits
to the Group. In protection, we expect our US business to
continue to build on the technological and distribution advantages
that have delivered record sales in 2023, and in the UK, we see
opportunities to further grow our distribution reach and
profitability.
Legal & General Capital
(LGC)
In LGC, we continue to focus on
delivering financial performance through responsible and impactful
investing whilst increasing our international diversification. Our
unique asset origination capabilities continue to be a key
differentiator for L&G in PRT as we manufacture bespoke
investments, tailored to create attractive long-term returns for
the annuity portfolio.
We continue to benefit from our
reputation and unique partnerships to access opportunities across
key sectors including Housing, Specialist Commercial Real Estate,
Clean Energy, General Partners Investing and Venture Capital
Platforms. This year, we are looking to invest alongside an
increasing number of third-party capital partners to create
long-term income streams, underpinned by societal demand. LGC
will further scale its impact, whilst securing additional revenue
for the Group as a result of third-party management and advisory
fees.
Legal & General
Investment Management (LGIM)
LGIM competes in the global asset
management market and invests both on behalf of L&G and for
third party clients; the latter contributes around 80% of global
revenues. Asset management is a long-term business, and we remain
confident in our strategy which positions LGIM for sustainable
future growth, supported by industry tailwinds.
Our medium-term ambition is
underpinned by the three strategic pillars, to modernise, diversify
and internationalise:
· Modernise: We are evolving
the business, investing in our people, platform and data
capabilities to improve operating effectiveness and deliver scale
benefits. This includes transformation of our operating model,
using State Street/Charles River to build a global investment and
middle office platform.
· Diversify: We are building on
our core capabilities to improve business mix by selectively adding
to our investment offering, with a focus on higher-margin areas
such as private markets, active fixed income and wholesale
distribution channels. We continue to focus on sustainable
investing.
· Internationalise: LGIM aims to be an innovator in regions and countries where
our strengths align to client needs and continues to expand
globally. Since 2018, LGIM's International AUM has grown by
81% to £465.4bn, representing 40% of AUM.
Our approach to capital
allocation
The Board believes it has
considerable opportunities available to deliver attractive returns
to shareholders by retaining and investing capital within the
Group.
The Board will at the same time
continually assess these investment opportunities against the
relative attractiveness of returning capital to shareholders either
through a buyback or a programme of buybacks.
If, at any point, the Board
believes that capital would be best deployed in this way, or if the
Board believed it had surplus capital, it would not hesitate to
return capital to shareholders. Any incremental capital
investment could also, over time, increase the likelihood of these
returns to shareholders.
We will provide further detail on
our approach to capital allocation and distribution at the Capital
Markets Event on the 12 June, 2024.
Dividend
The Group's dividend policy
states: "We are a long-term business and set our dividend annually,
according to agreed principles. The Board's intention for the
future is to maintain its progressive dividend policy, reflecting
the Group's expected medium-term underlying business growth,
including measurement of capital generation and adjusted operating
profit."
The Board has recommended a final dividend of 14.63p, giving
a full year dividend of 20.34p, up 5% from the prior year
(19.37p). The Board's intention is to grow the dividend at 5%
until FY24.
Legal & General Retirement
Institutional
FINANCIAL HIGHLIGHTS1 £m
|
|
|
2023
|
2022
|
Contractual service margin
release
|
|
|
591
|
497
|
Risk adjustment release
|
|
|
119
|
136
|
Expected investment
margin
|
|
|
344
|
280
|
Experience variances
|
|
|
(13)
|
16
|
Non-attributable
expenses
|
|
|
(160)
|
(130)
|
Other
|
|
|
5
|
8
|
Operating profit
|
|
|
886
|
807
|
Investment variance from longevity
assumption change
|
|
|
(249)
|
(131)
|
Other investment
variance
|
|
|
(200)
|
(6)
|
Profit before tax attributable to equity
holders
|
|
|
437
|
670
|
|
|
|
|
|
Contractual service margin
(CSM)
|
|
|
8,350
|
7,448
|
Risk adjustment (RA)
|
|
|
807
|
649
|
Total store of future profit
|
|
|
9,157
|
8,097
|
|
|
|
|
|
CSM release as a % of closing CSM pre
release
|
|
|
6.6%
|
6.3%
|
|
|
|
|
|
New business CSM
|
|
|
865
|
613
|
New business RA
|
|
|
161
|
80
|
Total new business future profit
|
|
|
1,026
|
693
|
|
|
|
|
|
UK PRT
|
|
|
12,048
|
7,319
|
International PRT
|
|
|
1,671
|
2,222
|
Total new business (Gross Premiums)
|
|
|
13,719
|
9,541
|
Funded reinsurance
premiums
|
|
|
(3,189)
|
(955)
|
Total new business (net of Funded
Reinsurance)
|
|
|
10,530
|
8,586
|
|
|
|
|
|
Institutional annuity assets2
(£bn)
|
|
|
68.9
|
60.1
|
1. IFRS 17 was introduced on 1
January 2023, comparatives have been restated accordingly. For
further information please see Note 1.01.
2. In the
UK, annuity assets across LGRI and Retail are managed together. We
show here LGRI estimated annuity assets. Excludes derivative
assets.
LGRI continued to deliver strong
operating profit, up 10% to £886m
Contractual Service Margin (CSM) release increased 19% to
£591m (2022: £497m). This reflects
the growth in our store of future profit which is supported by
profitable new business written and the routine longevity
review. In 2023, 6.6% of the closing CSM pre-release (£8.9bn)
was released into profit. Overall, the CSM grew 12.1% to
£8.4bn (2022: £7.4bn).
Investment related operating profits increased 23% to
£344m (2022: £280m). This increase
is driven by higher interest rates increasing the expected return
on surplus assets. In addition, this number also includes
asset optimisation actions which routinely fine-tune our annuity
backing asset portfolio to replace previously sourced assets with
newly sourced higher return investments.
Non-attributable expenses of £(160)m
(2022: £(130)m) reflect increasing
investment in operational capacity and resilience
to meet heightened global demand.
Profit before tax of £437m (2022: £670m) was impacted by
investment and other variances of (£(449)m). This is partly driven by the
impact of the longevity assumption change in H2 where the IFRS 17
contractual service margin is calculated using the locked-in
discount rate at inception, whilst the best estimate liabilities
are calculated using the current, higher discount rate. This effect
will unwind in future years as higher CSM releases. The remaining
portion largely relates to the unrealised
mark-to-market impact of higher rates on the surplus assets in our
annuity portfolio.
SII & IFRS margins consistent with long-term expectation
while adding £1.0bn of future profit
During 2023, we wrote £13.7bn
(£10.5bn net of reinsurance) of global pension risk transfer (PRT)
new business across 43 deals (2022: £9.5bn, 61 deals). UK
gross volumes increased by 65% to £12.0bn (2022: (£7.3bn) and
international volumes were £1.7bn (2022: £2.2bn).
Under IFRS 17, new business
profits are now deferred into the CSM and RA on the balance sheet
and recognised in operating profit over the lifetime of the
contract. New business added £1.0bn of future profit to the CSM and
RA, making a strong contribution to the growth of our store
of future profit over 2023.
The £12.0bn of UK PRT delivered a
7.4% UK Solvency II new business margin (2022: 8.9%) in line with
our long-term expectation. We continue to be disciplined in our
pricing and deployment of capital. We have successfully
executed transactions over the last few years at initial strain
levels below our 4% target. We actively optimise the
back-book in the course of normal business by matching newly
sourced, higher-return assets to back-book liabilities, resulting
in additional margin and profit generation post-sale.
Successful execution in the UK
leveraging internal synergies
LGRI's brand, scale and asset
origination capabilities - through synergies and expertise within
LGIM and LGC - are critical to our market
leadership in the UK PRT market. Long-term client
relationships, typically created and fostered by LGIM, have allowed
us to help many pension plans achieve their de-risking goals,
including the recent £4.8 billion full buy-in with the Boots
Pension Scheme, and the earlier £2.7bn follow-on transaction with
the British Steel Pension Scheme, executed under an umbrella
agreement.
Well positioned to execute in
international markets
LGRI delivered US PRT new business premiums
of $1,882m (2023: £1,463m, 2022:
$2,096m; £1,763m). In H2, we surpassed $10 billion of
total written premium with over 100 deals in the US since our
launch in 2015. This includes
roughly $5 billion secured in just the past three years and our
largest ever US transaction in July for $789m USD.
In 2023, we have written c$350m
CAD of Canadian liabilities through our reinsurance entity, L&G
Re. This brings L&G Re's total reinsured premium in the
Canadian PRT market to over $1.5bn CAD. We continue to
actively price in the Canadian and Dutch markets and remain
disciplined on price with a focus on long-term profitability and
shareholder returns.
Legal & General remains
strongly positioned to offer holistic, multinational pension
de-risking solutions, leveraging skills and capabilities across
geographies.
Retail
FINANCIAL HIGHLIGHTS1 £m
|
|
|
2023
|
2022
|
Contractual service margin
release
|
|
|
446
|
424
|
Risk adjustment release
|
|
|
74
|
85
|
Expected investment
margin
|
|
|
81
|
60
|
Experience variances
|
|
|
(44)
|
(99)
|
Non-attributable
expenses
|
|
|
(121)
|
(113)
|
Insurance profit
|
|
|
436
|
357
|
Other (Non-insurance
profit)
|
|
|
(28)
|
58
|
Operating profit
|
|
|
408
|
415
|
- US/UK
Insurance2
|
|
|
138
|
165
|
- Retail
Retirement3
|
|
|
270
|
250
|
Investment variance from longevity
assumption change
|
|
|
(69)
|
(36)
|
Other investment
variance
|
|
|
(131)
|
58
|
Profit before tax attributable to equity
holders
|
|
|
208
|
437
|
|
|
|
|
|
Contractual service margin
(CSM)
|
|
|
4,644
|
4,490
|
Risk adjustment (RA)
|
|
|
891
|
883
|
Total store of future profit
|
|
|
5,535
|
5,373
|
|
|
|
|
|
New business CSM
|
|
|
320
|
287
|
New business RA
|
|
|
32
|
28
|
Total new business future profit
|
|
|
352
|
315
|
|
|
|
|
|
Protection new business annual
premiums
|
|
|
412
|
382
|
Individual annuities single
premium
|
|
|
1,431
|
954
|
Workplace Savings net
flows4 (£bn)
|
|
|
6.3
|
7.3
|
Lifetime & Retirement Interest
Only mortgage advances
|
|
|
299
|
632
|
Retail retirement annuity
assets5 (£bn)
|
|
|
17.2
|
16.5
|
|
|
|
|
|
UK Retail protection gross
premiums
|
|
|
1,512
|
1,485
|
UK Group protection gross
premiums
|
|
|
479
|
427
|
US protection gross
premiums
|
|
|
1,273
|
1,222
|
Total protection gross premiums
|
|
|
3,264
|
3,134
|
|
|
|
|
|
Protection New Business
Value
|
|
|
165
|
166
|
Annuities New Business
Value
|
|
|
100
|
60
|
Solvency II New Business Value
|
|
|
265
|
226
|
1.
IFRS 17 was introduced on 1 January 2023,
comparatives have been restated accordingly. For further
information please see Note 1.01.
2.
UK Insurance includes Retail Protection, Group Protection, Fintech
and Mortgage Services.
3.
Retail Retirement includes Individual Annuities, Lifetime
Mortgages, Workplace Admin.
4.
This represents the Workplace Savings
administration business. Profits on the fund management services we
provide are included in LGIM's asset management operating
profit.
5.
In the UK, annuity assets across LGRI and Retail
are managed together. Estimated proportion of annuity assets
belonging to Retail Retirement. Excludes derivative
assets.
Operating profit of
£408m
In 2023, Retail operating profit was £408m
(2022: £415m). Whilst insurance operating profit of £436m is up 22% (2022:
£357m), driven by resilient on-going profit releases and improved
mortality experience in the US, total operating profit is down
given non-repeating gains on Fintech investments in 2022 and
macro-driven challenges in mortgage-related businesses (reflected
in "Other" above).
The Contractual Service Margin
(CSM) release was £446m (2022:
£424m), reflecting the release of previously stored insurance
profits. Growth in the CSM release was
driven by profitable new business written and the routine longevity
review in H2. In
2023, 8.8% of the closing CSM pre-release (£5.1bn) was released
into profit (2022: 8.6%, £4.9bn) and, overall, the CSM grew by 3.4%
to £4.6bn (2022: £4.5bn).
Experience variances of £(44)m (2022: £(99)m)
relate to less adverse mortality in the US (for
which we fully utilised the $40m provision setup in 2022) and
the impact of persistency experience and assumption changes in the
UK protection business that negatively impact onerous contracts.
Although better persistency is a net positive for the
portfolio, the benefit on profitable contracts is deferred and
reflected in the change in CSM, whereas the impact on onerous
contacts is recognised in the P&L under IFRS17.
Profit before tax was £208m (2022: £437m), significantly impacted by investment variances from longevity
assumption changes in our annuity portfolio in H2, and
the write-down of our investment in
Onto.
Solvency II New Business Value increased 17% to
£265m (2022: £226m) with growth in
Retail Annuities and US protection being offset by lower margins in
UK protection, due to higher interest rates and lower new business
volumes. We continue to operate with a focus on disciplined pricing
and on maintaining strong distribution channels.
Succeeding in a competitive
landscape in 2023
Retail annuity sales were £1,431m (2022: £954m), a record year, surpassing £1bn for the first
time since Pension Freedoms reform in 2015. Both Lifetime
Annuity and Fixed Term Annuity sales performed well throughout the
year as higher interest rates have made these products more
attractive to our customers.
Lifetime mortgage advances, including Retirement Interest
Only mortgages, were £299m (2022:
£632m) reflecting a decline in demand as a result of higher
interest rates. Throughout this period, we have maintained pricing
and underwriting discipline.
Workplace Savings net flows were £6.3bn
(2022: £7.3bn), as a result of
continued client wins and increased member
contributions. Workplace pension platform
members increased to 5.2 million in 2023.
UK Retail protection gross premium income increased to
£1,512m (2022: £1,485m), with new
business annual premiums of £150m (2022: £171m) in what remained a
highly competitive market. L&G continues to be a leader
in this market with a share of 18.4%[8],
delivering a point-of-sale underwriting decision for more than 80%
of our customers.
UK Group protection gross premium income increased 12% to
£479m (2022: £427m)
as a result of good retention and new
business annual premiums of £121m (2022:
£107m). Our online "quote and apply" platform for smaller
schemes continues to perform well, processing c900 new clients over
the year (2022: c600), and we continue to see growth in this part
of the market. Group Protection saw 2,929 income protection scheme
members return to work during the year.
US protection (LGIA) new business annual premiums increased
36% to $175m (2022: $129m), with robust Solvency II new
business margins of 11.4 % (2022: 10.6%).
Gross premiums
increased 5% to $1,584m (2022: $1,512m). Our digital new
business platform is making it easier for customers and their
advisors to apply and buy our term products, resulting in our
best-ever single year sales volumes in 2023. This is driving
up our market share: LGIA ranked number one in the independent
broker channel and third in the overall US term market in Q3 2023,
up from fifth in 2022.[9] We expect
to drive further sales growth and to reduce unit costs over the
coming years. Over 90% of eligible new business is now
submitted through our digital new business
platform.
Legal & General Capital
(LGC)
FINANCIAL HIGHLIGHTS £m
|
2023
|
2022
|
Operating profit
|
510
|
509
|
- Alternative asset
portfolio
|
371
|
400
|
- Traded investment portfolio &
Treasury
|
139
|
109
|
Investment and other
variances1,2
|
(381)
|
(428)
|
Profit before tax attributable to equity
holders2
|
129
|
81
|
|
|
|
ALTERNATIVE ASSET PORTFOLIO £m
|
|
|
Specialist commercial real
estate
|
868
|
811
|
Clean energy
|
374
|
272
|
Residential
property2
|
2,319
|
2,248
|
Alternative Finance
|
933
|
811
|
|
4,494
|
4,142
|
TRADED ASSET PORTFOLIO £m
|
|
|
Equities
|
964
|
1,159
|
Bonds
|
212
|
348
|
Derivative assets
|
16
|
34
|
Cash and
loans3
|
1,118
|
1,145
|
Total
|
2,310
|
2,686
|
|
|
|
LGC investment portfolio
|
6,804
|
6,828
|
Treasury assets at holding
company
|
1,219
|
1,588
|
Total
|
8,023
|
8,416
|
1. Excludes 2023 costs relating to
the announced Modular Homes closure.
2. 2022 restated to reflect the
impact of the implementation of IFRS 9 on certain intra-segment
assets.
3. Includes short term liquid
holdings and loans at FV.
Total operating profit of
£510m
LGC operating profit is flat at £510m versus prior year
earnings (2022: £509m). Our
alternative asset portfolio contributed
£371m of
operating profit (2022: £400m), reflecting a resilient performance
in the higher interest rate environment.
LGC's alternative asset portfolio grew 8.5% to
£4.5bn as we deployed £0.6bn into
new and existing investments in the UK and internationally,
further strengthening our capabilities across a diversified range of alternative
assets that are underpinned by structural growth drivers.
Through its investments, LGC
originates assets that generate attractive returns for
shareholders, creates Matching Adjustment (MA)-eligible assets for
the Group's annuity portfolio, and supplies valuable alternative
assets to third-party clients. Third-party AUM increased to £18.1bn
(2022: £16.6bn) and is on track to grow to £25-30bn by
2025.
Profit before tax was £129m, with
investment and other variances of £(381)m, driven primarily by the
mark-to-market impact of higher interest rates on LGC's portfolio.
Whilst market conditions can drive short-term volatility in
valuations, we remain confident in the long-term profitability of
our alternative asset portfolio.
Specialist commercial real estate:
supporting the levelling up agenda through strategic
partnerships
Across the UK and US, we are
investing in Specialist Commercial
Real Estate (SCRE), including laboratory and flexible
best-in-class facilities for innovation-based, high-growth
start-ups, scale-ups and global businesses in the life sciences and
technology sectors Building on our track
record to deliver place-based regeneration, we are delivering
mixed-use redevelopment for towns and cities, including our £4bn
partnership with Oxford University and our JV, English Cities
Fund.
Bruntwood SciTech is now the
largest dedicated property platform serving the UK's innovation
economy and aims to create a £5 billion UK-wide portfolio that can
support 2,600 high-growth businesses by 2032. In 2023, it
secured £500m of additional investment and welcomed Greater
Manchester Pension Fund (GMPF), the UK's largest local authority
pension fund, to the partnership.
LGC's 50:50 partnership with
Ancora, a US real estate developer and asset manager dedicated to
driving life sciences, research and technology growth in North
America, continues to grow with three
sites across the US, providing a valuable
ecosystem for universities including Yale, Brown and Georgia
Tech.
We are also helping to meet
society's increasing need for data warehousing and computer
processing. As a compelling strategic growth opportunity, LGC has
provided further investment into its data centre platform Kao Data,
alongside leading infrastructure investment firm Infratil. In
January 2024, Kao Data secured a £206m debt facility, provided by
Deutsche Bank. This further demonstrates its growth from a
start-up to a scale-up, its industry leading reputation, and the
demand for world-class infrastructure, engineered for artificial
intelligence (AI).
Our Clean Energy portfolio
expanded into new sectors
The transition to net zero
requires significant capital investment in new technologies, assets
and infrastructure. LGC's approach is deliberate in combining
both early-stage technology development and scale-up for adoption,
supported through our growth equity portfolio alongside investment
into both new and established clean energy infrastructure
assets.
In our clean energy infrastructure
portfolio, we continue to scale our strategic partnership with NTR,
leveraging LGIM's distribution capabilities and NTR's sector
expertise to raise and deploy significant capital into new and
existing renewable energy projects. In 2023, Legal &
General launched the L&G NTR Clean Power (Europe) Fund which
raised €390m in its first close, bringing NTR's total assets under
management to over €900m across its three funds and putting third
party capital to work to drive Europe's decarbonisation and energy
security agenda.
In May 2023, Kensa (the country's
leading manufacturer and installer of ground source heat pumps),
secured an additional £70m investment and welcomed Octopus Energy
as partners alongside LGC. Recognising the market opportunity
that decarbonising residential real estate presents, we have now
committed £49m across a range of investments in support of numerous
initiatives, including reducing construction emissions and
developing technologies to retrofit existing housing
stock.
Housing: A multi tenure platform,
diversified across affordability and life stages
LGC's Build to Sell business, Cala, has
performed well over 2023, in the face of a challenging market.
Having grown to become the 10th largest housebuilder in the
UK by revenue, Cala sold 2,917 units in 2023, delivering revenue of
£1.3bn and profit before tax of £112m. Cala's performance was
good compared to the wider market with sales rates remaining stable
over 2023 and close to our long-term norm. Reservations on
private units currently stand at 43% of the full year, providing
confidence in H1 2024 revenues.
Our Affordable Homes business has continued
to establish itself as one of the UK's leading institutional
developers and managers of affordable housing, with a total
operational pipeline of 7,464 units and a Gross Asset Value of
around £1.2bn. It was given the highest ratings by its
regulator for both financial viability and governance, and is a
strategic partner of Homes England. The business is well
placed to create assets which provide robust, inflation-linked
income for both our annuity portfolio and, increasingly, third
party investors.
Accelerating the growth of private
asset managers through Alternative Finance
By investing in the real economy
and technological advancements through our General Partners (GP)
Investing and Venture Capital platforms, we are continuing to
support growth businesses and deliver enhanced returns, whilst
boosting job creation and innovation.
The Pemberton platform has raised
over €19bn (2022: €16.5bn) from a global pool of 227 investors
across seven strategies since we first invested in 2014. As
the market evolves, Pemberton continues to innovate and add new
products to its platform. In February 2023, Pemberton's
Working Capital Finance Strategy hit the milestone of $1 billion of
committed funds, helping to create further value in the business.
Pemberton manages Limited Partner (LP) capital on behalf of
both LGC and LGRI, delivering direct investments which strengthen
the Group's competitive position in pricing to win large global PRT
deals.
In March 2023, we invested in
ImpactA Global, a women-led Impact asset management firm
established to provide debt financing for sustainable
infrastructure projects in emerging markets. LGC committed up
to $100m in further funding to ImpactA as they secure opportunities
to invest in sustainable infrastructure that delivers attractive
returns, alongside positive social and environmental
impact.
Our Venture Capital funds
portfolio supports the growth of around 700 companies. The university
spin-out market is an area of particular focus for us, and a sector
where we are seeing increasing appetite from third-party capital
partners to invest alongside us. Our unique proposition
benefits from long-standing relationships with the UK's leading
research institutions, helping create the outstanding businesses of
the future.
Legal & General Investment
Management (LGIM)
FINANCIAL HIGHLIGHTS £m
|
|
|
2023
|
2022
|
Management fee revenue
|
|
|
876
|
944
|
Transactional revenue
|
|
|
26
|
26
|
Total revenue
|
|
|
902
|
970
|
Total costs
|
|
|
(628)
|
(630)
|
Operating profit
|
|
|
274
|
340
|
Investment and other
variances
|
|
|
(76)
|
(81)
|
Profit before tax
|
|
|
198
|
259
|
Asset Management cost:income ratio (%)
|
|
|
70
|
65
|
|
|
|
|
|
NET
FLOWS AND ASSETS £bn
|
|
|
|
|
External net flows
|
|
|
(38.4)
|
49.6
|
PRT Transfers
|
|
|
(15.2)
|
(3.1)
|
Internal net flows
|
|
|
1.6
|
0.1
|
Total net flows
|
|
|
(52.0)
|
46.6
|
Persistency1 (%)
|
|
|
86
|
88
|
Average assets under management
|
|
|
1,155
|
1,309
|
Assets under management
|
|
|
1,159
|
1,196
|
Of
which:
|
|
|
|
|
- International assets under
management2
|
|
|
465
|
441
|
- UK DC assets under management
|
|
|
163
|
135
|
1.
Persistency is a measure of LGIM client asset retention, calculated
as a function of net flows and closing AUM.
2.
International AUM includes assets from internationally domiciled
clients plus assets managed internationally on behalf of UK
clients.
Operating profit of
£274m
Operating profit of £274m (2022:
£340m) reflects the ongoing impact of higher interest rates on the
value of assets under management, with average AUM 12% lower
year-over-year. Revenue of £902m (2022: £970m) is down 7%,
impacted to a lesser extent by the decline in AUM, reflecting
LGIM's conscious shift towards higher margin business.
We are maintaining a disciplined
approach to cost management whilst continuing to invest
deliberately and for the long-term. We took expense actions
over 2023, including selective reshaping of the workforce and
restraint on recruitment and variable compensation. This led to
flat costs in 2023 compared to the prior year, despite significant inflationary pressure.
Assets under management (AUM)
decreased by 3% year-on-year to £1,159.2bn (2022: £1,195.7bn).
External net flows of £(38.4)bn reflects UK Defined Benefit
clients adjusting their portfolios in response to improved funding
ratios, with many now positioning for PRT. LGIM is a
beneficiary when our clients undertake PRT with LGRI.
Excluding UK Defined Benefit, LGIM's external net flows were
positive at £0.9bn, generating annualised net new revenue of £24m.
This reflects our focus on attracting flows into higher margin
areas such as ETF, Multi-Asset and Real Assets.
LGIM is a leader in responsible
investment, and we continue to innovate and be recognised for our
strength in this growing area of the market, winning the
prestigious Pensions Age 'Sustainability Advisor of the Year' award
in 2023. As at 31 December 2023, LGIM managed £378.1bn (2022:
£332.2bn) in responsible investment strategies explicitly linked to
ESG criteria for a broad range of clients.[10] We now assess over 5,000 companies across 20
'climate-critical' sectors, and we can apply exclusions to over
£176bn of assets.
Expanding our global footprint with International
AUM
We are successfully building the
business, growing international AUM by 81% since 2018 to £465.4bn
(40% of overall AUM). We are a leading corporate pension manager in
the US, working with clients to implement pensions' de-risking
strategies. We have refocused our index
capabilities, creating bespoke indices for clients via our Index
Solutions team and have seen early success with £6.4bn in higher
margin Index Plus mandates in 2023. US assets grew by 4% to
£205.0bn over 2023.
In Europe, our growth is being led
by expertise in ETFs, Active Fixed Income and responsible
investing. We have expanded the number of relationships with
clients and partners in our core markets of Germany, Italy,
Switzerland and the Nordics, and have recently opened an office in
Zurich. In May, we announced a partnership with AP7 to
establish an innovative climate transition strategy, raising £400m.
Our AUM across mainland Europe is £85.7bn representing a 11% annual
increase.
Our AUM in Asia, including Japan,
has reached £139.1bn, and we now have clients across 9 countries in
the region. AUM in Asia, excluding Japan, grew by 12% over 2023 and
included new mandates in Thailand, Korea and Taiwan. In
Japan, our AUM has almost doubled since 2019, and we are now
Japan's 7th largest asset manager.[11] In September we opened a new Singapore office to
serve clients in south-east Asia, building connectivity with our
London and Zurich offices to serve the important Global Financial
Institutions channel.
Supporting our institutional
Defined Benefit clients to achieve their objectives
As the UK DB market matures, we
are supporting over 2,000 LGIM clients to achieve their buyout
objective, with many likely to choose LGRI as a pension risk
transfer partner. Over the last three years, 88% of LGRI UK
PRT new business premiums have come from LGIM clients, meaning LGIM
will continue to manage assets backing the pension liabilities for
many years. Recent examples include the British Steel Pension
Scheme and the Boots Pension Scheme, which insured a combined
£13.5bn of pension liabilities with LGRI. In the US, improved
funding ratios due to higher interest rates have increased demand
for our customised liability hedging strategies. With over
75%[12] of Defined Benefit pension
schemes now targeting buy-out as their ultimate end-state, we
expect to increase revenue by providing a full range of investment
solutions across the de-risking journey.
Ongoing strength in Defined
Contribution
Our Defined Contribution (DC)
business continues to attract new assets with AUM of £163bn (2022:
£135bn), and external net flows of £12.4bn contributing to
annualised net new revenue of £16m. This growth was supported by
Retail's Workplace pension business, which now has 5.2 million
members. This success is underpinned by LGIM's strong
customer focus and innovative product proposition, as shown by a
92% persistency rate among our DC customers. AUM has more
than doubled since 2018. In January 2024, we submitted our
application to the FCA for a new fund that will hold private assets
for DC investors. The fund will launch later this year, subject to
regulatory approval, and underlines our commitment to providing
innovative solutions to our DC investors' needs.
L&G also has one of the
largest and fastest-growing UK Master Trusts, which now has £25.4bn
of AUM, and was the first commercial Master Trust to surpass £20bn
of AUM. The growth reflects the increasing appeal of the
structure for DC plans wishing to outsource their governance,
investment and administration. Our ability to offer investors
an integrated blend of high-quality investment solutions, pensions
administration and Master Trust governance is a significant source
of competitive advantage. In June, L&G's Master Trust won
the coveted Corporate Advisor award for Best Master Trust for the
third year in a row.
Accelerating growth in
Wholesale
We ended 2023 with record levels
of Wholesale AUM at £68bn, growing 20% over 2023. In UK
Wholesale, we achieved our highest ever gross sales and ranked 2nd
across the industry. We launched new Active Fixed Income
(AFI) funds, and saw renewed client interest across our AFI
strategies following the normalisation of interest rates, including
strong performance in our Strategic Bond Fund. Our
Multi-Asset capabilities continue to attract net inflows, with AUM
now totalling £11bn.
Since acquisition of the Canvas
ETF business in 2018, revenue has more than tripled. Our focus is
on thematic strategies, with the range continuing to show
resilience, with £1.9bn of external net flows in 2023. This
year we launched an ETF partnership with Gerd Kommer in Germany,
with a co-branded ETF being distributed into the German Savings
Plan market, raising £112m. LGIM is ranked second based on
AUM in the European thematic ETF market.[13]
Growing our Real Assets
Platform
Real Assets saw total net flows of
£1.5bn (2022: £3.2bn) driven by £2.9bn of Private Credit
transactions of which the majority support LGRI's PRT
proposition. Private
Credit AUM reached £18.6bn[14] in 2023, and
we expect it to be core to future growth in flows as clients seek
diversification of secure income and value protection. UK
Defined Benefit investors are now accessing these capabilities
through our successful SIAF and STAFF[15]
private credit funds, and DC investors are increasingly considering
our illiquid strategies.
Our Real Estate and Infrastructure
Equity platform remains strong with AUM of £18.3bn. In 2023,
and as noted previously, we raised €390m in the first close of the
Clean Power (Europe) Fund working in partnership with NTR. We
have hired a team in the US to focus on
real estate markets where we see potential. Our property fund for UK retail investors is one of
the market leaders with over £1.2bn of AUM. We worked closely
with LGC to build client offerings across affordable housing,
operational real assets and UK university spin-outs, that we expect
to launch with significant interest in 2024. Our strategy is to
externalise capabilities that we have built in collaboration with
other parts of Legal & General.
Investment Performance
Investment performance has been
strong across our range of matching, tracking and active
strategies. For our UK-managed Active Fixed Income
strategies, 64% of strategies out-performed over 1 year, 83% over 3
years and 95% over 5 years. US-managed Active Fixed Income
strategies also performed well with 60% of strategies
out-performing over 1 year, 75% over 3 years and 73% over 5 years.
Multi-Asset strategies outperformed by 63% over 1 year, 36% over 3
years and 62% over 5 years. Within Private Markets, 71% of
our Real Estate Equity funds outperformed over 1 year, 100% over 3
years and 86% over 5 years.
Subsidiary remittances to Group
Subsidiary remittances1
(£m)
|
|
|
2023
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LGAS
|
|
|
752
|
784
|
LGIM
|
|
|
140
|
279
|
LGA
|
|
|
185
|
97
|
Other2
|
|
|
472
|
394
|
Total
|
|
|
1,549
|
1,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1. Represents cash remittances from subsidiaries to Group in
respect of the year's financial performance.
2. Other includes Legal &
General Capital Investments Limited, Legal & General
Reinsurance, Legal & General Partnership Services Limited and
Legal & General Home Financing.
The level of subsidiary dividends
ensures coverage of external dividends (2023: £1,212m; 2022:
£1,153m), Group related costs, with excess liquidity being held
within our regulated subsidiaries.
Borrowings
The Group's outstanding core
borrowings totalled £4.3bn at 31 December 2023 (2022:
£4.3bn). There is also a further £1.8bn (2022: £1.2bn) of
operational borrowings including £1.4bn (2022: £0.9bn) of
non-recourse borrowings.
Group debt costs of £212m (2022:
£214m) reflect an average cost of debt of 4.8% per annum (2022:
4.8% per annum) on an average nominal value of debt balances of
£4.5bn (2022: £4.5bn).
Taxation
Equity holders' Effective Tax Rate (%)
|
|
|
2023
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders' total Effective
Tax Rate1
|
|
|
11.9
|
10.4
|
Annualised rate of UK corporation
tax
|
|
|
23.5
|
19.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1 Excluding the impact of the Bermudan corporate income tax
enacted in 2023, the investment variance from longevity assumption
changes (see page 6 and 8) and the buyout of the L&G pension
scheme (see note 3.14.iii). Including this impact, the effective
tax rate in 2023 is (482.9)%
The Group has a credit for the
year of £367m which includes a material one-off tax credit of £340m
on the recognition of a deferred tax asset relating to the
introduction of a new Bermuda corporate income tax regime.
Absent this impact, the effective tax rate reflects the varying
rates of tax that we pay on our businesses in different territories
and the mixture of profits and losses across those
territories.
Solvency II
As at 31 December 2023, the Group
had an estimated Solvency II surplus of £9.2bn over its Solvency
Capital Requirement, corresponding to a Solvency II coverage ratio
of 224%.
Capital (£m)
|
2023
|
2022
|
Own Funds
|
16,556
|
17,226
|
Solvency Capital Requirement
(SCR)
|
(7,389)
|
(7,311)
|
Solvency II surplus
|
9,167
|
9,915
|
SCR coverage ratio (%)
|
224
|
236
|
Analysis of movement from 1 January to 31 December
20231 (£m)
|
|
Solvency II Own
Funds
|
Solvency II
SCR
|
Solvency II
Surplus
|
|
|
|
|
|
Operational surplus generation
|
|
1,596
|
225
|
1,821
|
New business
strain2
|
|
551
|
(989)
|
(438)
|
Net surplus generation
|
|
2,147
|
(764)
|
1,383
|
Operating
variances
|
|
|
|
(307)
|
Mergers, acquisitions and
disposals
|
|
|
|
(140)
|
Market movements
|
|
|
|
(512)
|
Subordinated debt
|
|
|
|
-
|
Dividends paid
|
|
|
|
(1,172)
|
|
|
|
|
|
Total surplus movement (after dividends paid in the
period)
|
|
(670)
|
(78)
|
(748)
|
|
|
|
|
|
|
|
|
|
|
|
| |
1. Please
see disclosure note 5.01(iv) for further detail.
2. Reported
new business strain includes impact from SII risk margin
reform.
Operational surplus generation increased to £1,821m
(2022: £1,805m), after
allowing for amortisation of the opening Transitional Measures on
Technical Provisions (TMTP) and release of Risk
Margin.
New business strain was £(438)m,
primarily reflecting elevated PRT volumes written at capital strain
levels in line with our long-term average. This resulted in net
surplus generation of £1,383m (2022: £1,453m), which was in excess
of the dividends paid during the year.
Operating variances include the
impact of experience variances, changes to assumptions and
management actions.
Market movements of £(512)m
primarily reflect the impact of higher rates on the mark to market
valuation of our assets, partially offset by other, smaller
variances such as credit spread dispersion in sub-investment grade
assets, and inflation.
The movements shown above
incorporate the impact of recalculating the TMTP as at 31 December
2023.
Sensitivity analysis3
|
Impact on net of tax Solvency
II capital surplus
2023
£bn
|
Impact on net of tax Solvency
II coverage ratio
2023
%
|
100bps increase in risk-free
rates
|
0.1
|
10
|
100bps decrease in risk-free
rates
|
(0.2)
|
(11)
|
Credit spreads widen by 100bps
assuming an escalating addition to ratings
|
0.4
|
14
|
Credit spreads narrow by 100bps
assuming an escalating deduction from ratings
|
(0.6)
|
(18)
|
Credit spreads widen by 100bps
assuming a flat addition to ratings
|
0.5
|
15
|
Credit spreads of sub-investment
grade assets widen by 100bps assuming a level addition to
ratings
|
(0.2)
|
(7)
|
Credit migration
|
(0.7)
|
(10)
|
25% fall in equity
markets
|
(0.4)
|
(3)
|
15% fall in property
markets
|
(0.9)
|
(10)
|
50bps increase in future inflation
expectations
|
(0.1)
|
(3)
|
10% increase in maintenance
expenses
|
(0.3)
|
(4)
|
|
|
| |
3. Please see disclosure 5.01
(vii) for further details.
The above analysis does not
reflect all possible management actions which could be taken to
reduce the impact of each sensitivity due to the complex nature of
the modelling. In practice, the Group actively manages its
asset and liability positions to respond to market movements.
Other than in the interest rate and inflation stresses, we have not
allowed for the recalculation of TMTP. The impacts of these
stresses are not linear therefore these results should not be used
to interpolate or extrapolate the impact of a smaller or larger
stress.
The results of these tests are
indicative of the market conditions prevailing at the balance sheet
date. The results would be different if performed at an
alternative reporting date.
The impacts of credit spreads and
risk-free rate sensitivities are primarily non-economic arising
from movements in balance sheet items that result from changes in
the discount rates used to calculate the value of assets and
liabilities. The credit migration stress, in the absence of
defaults, delays the emergence of operating surplus generation, but
does not reduce the actual quantum of future releases.
Similarly, equity and property stresses only result in losses if
assets are sold at depressed values.
Solvency II new business
contribution
Management estimates of the
present value of new business (PVNBP) and the margin as at 31
December 2023 are shown below1:
|
|
|
|
|
£m
|
PVNBP
|
Contribution
from
new
business
|
Margin %
|
|
|
|
|
LGRI - UK annuity business
|
8,859
|
654
|
7.4
|
Retail Retirement - UK annuity business
|
1,431
|
100
|
7.0
|
UK Protection Total
|
1,337
|
37
|
2.8
|
US Protection
|
1,123
|
128
|
11.4
|
|
|
|
|
|
|
|
|
|
|
| |
The key economic assumptions as at
31 December 2023 are as follows:
|
|
|
%
|
Margin for risk
|
|
|
4.2
|
Risk-free rate
|
|
|
|
- UK
|
|
|
3.3
|
- US
|
|
|
3.9
|
|
|
|
|
Risk discount rate (net of tax)
|
|
|
|
- UK
|
|
|
7.5
|
- US
|
|
|
8.1
|
|
|
|
|
Long-term rate of return on non-profit
annuities
|
|
|
4.9
|
1. Please
see disclosure 5.02 for further details.
The future earnings are discounted
using duration-based discount rates, which is the sum of a
duration-based risk-free rate and a flat margin for risk. The
risk-free rate shown above is a weighted average based on the
projected cash flows.
Economic and non-economic
assumptions are set to best estimates of their real-world outcomes,
including a risk premium for asset returns where appropriate. In
particular:
·
The assumed future pre-tax returns on fixed
interest and RPI linked securities are set by reference to the
yield on the relevant backing assets, net of an allowance for
default risk which takes into account the credit rating and the
outstanding term of the assets. The weighted average
deduction for business written in 2023 equates to a level rate
deduction from the expected returns of 19 basis points. The
calculated return takes account of derivatives and other credit
instruments in the investment portfolio.
·
Non-economic assumptions have been set at levels
commensurate with recent operating experience, including those for
mortality, morbidity, persistency and maintenance expenses
(excluding development costs). An allowance is made for
future mortality improvement. For new business, mortality
assumptions may be modified to take certain scheme specific
features into account.
The profits on the new business are
presented gross of tax.
Principal risks and
uncertainties
The directors confirm that they
have carried out a robust assessment of the emerging and principal
risks facing the Group, including those that would threaten its
business model, future performance, solvency or
liquidity.
The principal risks are set out
below including details of how they have been managed or mitigated.
Further details of the Group's inherent risk exposures are set out
at Notes 7 and 15 to 17 of the financial statements.
RISKS AND UNCERTAINTIES
|
RISK MITIGATION
|
OUTLOOK
|
|
|
|
|
|
|
|
|
|
Investment market performance and conditions in the broader
economy may adversely impact earnings, profitability, or surplus
capital.
The performance and liquidity of
financial and property markets, interest rate movements and
inflation impact the value of investments we hold in both
shareholders' funds and to meet the obligations from insurance
business; the movement in certain investments directly impacts
profitability. Interest rate movements and inflation can also
change the value of our obligations and although we seek to match
assets and liabilities, losses can still arise from adverse
markets. Falls in the risk-free yield curve can also create a
greater degree of inherent volatility to be managed in the solvency
balance sheet, potentially impacting capital requirements and
surplus capital. Falls in investment values can reduce our
investment management fee income.
|
We cannot completely eliminate the
downside impacts on our earnings, profitability or surplus capital
from investment market volatility and adverse economic conditions,
although we seek to position our investment portfolios and wider
business plans for a range of plausible economic scenarios and
investment market conditions to ensure their resilience across a
range of outcomes. This includes setting risk limits on exposures
to different asset classes and where hedging instruments exist, we
seek to limit our exposure on a financial reporting
basis.
Our Own Risk Solvency Assessment
(ORSA) is integral to our risk management approach, and includes an
assessment of the financial impacts of risks associated with
investment market volatility and adverse economic scenarios for our
solvency balance sheet, capital sufficiency, and liquidity
requirements.
|
The global economic outlook remains
uncertain with the potential for interest rates to remain at
current levels for longer than anticipated by the markets and
longer than required to subdue inflation. This could lead to
significant unintended damage to the broader economy, including a
sustained period of low investment and growth, reduced consumer
spending, and higher unemployment. Our businesses are primarily
exposed to the UK and US economies.
Asset values, including commercial
and residential property prices, remain susceptible to reappraisal
should the current economic outlook deteriorate, as well as from a
range of geo-political factors including the on-going war in
Ukraine and conflict in the Middle East. Towards the end of 2023
commercial property markets stabilised to an extent and some
confidence returned. Within our construction businesses supply
chain, cost inflation and labour shortages continue to present
risk.
|
In
dealing with issuers of debt and other types of counterparty, the
Group is exposed to the risk of financial loss.
Systemic corporate sector failures,
or a major sovereign debt event, could, in extreme scenarios,
trigger defaults impacting the value of our bond portfolios. Under
Solvency II, a widespread widening of credit spreads and downgrades
can also result in a reduction in our balance sheet surplus,
despite already having set aside significant capital for credit
risk. We are also exposed to default risks in dealing with banking,
money market and reinsurance counterparties, as well as settlement,
custody, and other bespoke business services. Default risk also
arises where we undertake property lending, with exposure to loss
if an accrued debt exceeds the value of security taken.
|
We manage our exposure to downgrade
and default risks within our bond portfolios, through setting
selection criteria and exposure limits, and using LGIM's global
credit team's capabilities to ensure risks are effectively
controlled, where appropriate trading out to improve credit
quality. In our property lending businesses, our loan criteria take
account of borrower creditworthiness and the potential for
movements in the value of security.
We manage our reinsurer exposures
tightly with the vast majority of our reinsurers having a minimum
A- rating, setting rating-based exposure limits, and where
appropriate taking collateral. Similarly, we seek to limit
aggregate exposure to banking, money market and service providers.
Whilst we manage risks to our balance sheet, we can never eliminate
downgrade or default risks, although we seek to hold a strong
balance sheet that we believe to be prudent for a range of adverse
scenarios.
|
The risk of credit default
increases in periods of low economic growth, and we continue to
closely monitor the factors that may lead to a widening of credit
spreads including the outlook for the real economy and fiscal and
monetary policy.
Although real incomes in the UK
have risen in 2023, any reversal of this would particularly impact
economic activity in sectors reliant on discretionary
spending.
We remain vigilant, closely
monitoring all the names/assets in our portfolio in the short-term,
as well as forming views on the medium to long -term
outlook. Our credit portfolio remains
overwhelmingly (99%) investment grade, and our office property
lending continues to focus on high-grade assets let to investment
grade or government tenants.
|
|
|
|
|
|
|
RISKS AND UNCERTAINTIES
|
RISK MITIGATION
|
OUTLOOK
|
We
fail to respond to the emerging threats from climate change for our
investment portfolios and wider businesses.
As a significant investor in
financial markets, commercial real estate and housing, we are
exposed to climate related transition risks. Abrupt shifts in the
political and technological landscape impact the value of those
investment assets associated with higher levels of greenhouse gas
emissions.
Physical risks, stemming from
extreme climate outcomes, could impact the valuation of at-risk
assets, for example flood could impact the value of our property
assets; and could also potentially have longer-term effects on
mortality rates.
We are also exposed to reputation
and climate related litigation risks should our responses to the
threats from climate change be judged not to align with the
expectations of environment, social and governance (ESG) groups.
Our risk management approach is also reliant upon the availability
of verifiable consistent and comparable emissions data.
|
We recognise our scale brings a
responsibility to act decisively in positioning our balance sheet
to address climate change risks We assess climate change risks in
our investment process, including the management of real assets and
measure the carbon intensity targets of our investment portfolios.
Along with specific investment exclusions for carbon intensive
sectors, we have set overall reduction targets aligned with the
1.5°C Paris Agreement. This includes setting near term
science-based targets to support our long-term emission reduction
goals in line with our Climate transition plan.
We continue to develop how we
incorporate the potential physical impacts of the climate change on
both assets and liabilities into our modelling and projects, while
also evolving our approach to include nature and biodiversity in
our climate risk work.
Alongside managing climate
exposures, we closely monitor the political and regulatory
landscape, and as part of our climate strategy we engage with
regulators and investee companies in support of climate action. As
we change how we invest, the products and services we offer, and
how we operate, we are also mindful of the need to ensure that we
have the right skills for the future.
|
Over the next decade, the change
necessary to meet global carbon reduction targets will require
societal adjustments on an unprecedented scale.
The events of 2023, particularly
the increasing frequency of record-breaking heat events and the
extreme summer weather events experienced in the northern
hemisphere, have demonstrated that the impacts of increased climate
volatility can be significant and may emerge rapidly.
If governments fail to ensure an
orderly transition to low carbon economies, it increases the risk
of sudden late policy action and large, unanticipated shifts in the
asset values of impacted industries. Our transition plans aims to
minimise exposure to this risk, but its success is dependent on the
delivery of the policy actions and the climate reduction targets of
the firms we invest in. The actions governments take will also,
significantly impact our ability to meet our climate targets, and
as the science of climate change evolves, we may need to adapt our
actions. Additionally anti ESG sentiment, particularly within
countries with a high dependency on fossil fuel related industries,
may limit global efforts to address climate change and investment
opportunities.
Although a broad set of actions to
limit global warming is underway, we are moving to a situation
where the path to achieving a sub-1.5 temperature increase is
becoming narrower. This could also have an impact on our ability to
meet the climate-related targets we have set
ourselves.
We expect a continuing and
increased focus on nature and biodiversity risks going
forward.
|
A
material failure in our business processes or IT security may
result in unanticipated financial loss or reputation
damage.
We have constructed our framework
of internal controls to minimise the risk of unanticipated
financial loss or damage to our reputation. However, no system of
internal control can completely eliminate the risk of error,
financial loss, fraudulent actions, or reputational damage. We are
also inherently exposed to cyber threats including the risks of
data theft and fraud and more generally it is imperative that we
maintain the privacy of our customers' personal data.
There is also strong stakeholder
expectation that our core business services are resilient to
operational disruption.
|
Our risk governance model seeks to
ensure that business management are actively engaged in maintaining
an appropriate control environment, supported by risk functions led
by the Group Chief Risk Officer, with independent assurance from
Group Internal Audit.
We continue to evolve our risk
management approach for IT, operational resilience and data access
and privacy.
Whilst we seek to maintain a
control environment commensurate with our risk profile, we
recognise that residual risk will always remain across the spectrum
of our business operations and we aim to develop response plans so
that when adverse events occur, appropriate actions are
deployed.
|
We continue to remain alert to
evolving operational risks and invest in our system capabilities,
including those for the management of cyber risks, to ensure that
our business processes are resilient. We also remain cognisant of
the risks as we implement a new global operating model and IT
platform for LGIM and have structured the migration in phases to
minimise change risks.
|
|
|
|
RISKS AND UNCERTAINTIES
|
RISK MITIGATION
|
OUTLOOK
|
Changes in experience, regulation or legislation may require
revisions to our reserves and capital requirements, and could also
impact our reported solvency position and dividend
policy.
The pricing of long-term business
requires the setting of assumptions for long-term trends in factors
such as mortality, lapse rates, expenses, interest rates and credit
defaults. Actual experience may require recalibration of these
assumptions, changing the level of provisions and impacting
reported profitability.
Regulation defines the overall
framework for the design, marketing, taxation and distribution of
our products, and the prudential provisions and capital that we
hold. Significant changes in legislation or regulation may increase
our cost base, reduce our future revenues, impact profitability or
require us to hold more capital.
The prominence of the risk
increases where change is implemented without prior engagement with
the sector. The nature of long-term business can also result in
some changes in regulation, and the re-interpretation of regulation
over time, having a retrospective effect on in-force books of
business, impacting future cash generation.
Changes in these areas can affect
our reported solvency position and dividend policy.
|
We undertake significant analysis
of the variables associated with writing long-term insurance
business to ensure that a suitable premium is charged for the risks
we take on, and that provisions continue to remain appropriate for
factors including mortality, lapse rates, expenses, valuation
interest rates and credit defaults in the assets backing our
insurance liabilities.
We seek to have a comprehensive
understanding of longevity, mortality and morbidity risks, and we
continue to evaluate wider trends in life expectancy. However, we
cannot remove the risk that adjustment to reserves may be required,
although the selective use of reinsurance acts to reduce the
impacts to us of significant variations in life expectancy and
mortality.
We actively engage with government
and regulatory bodies to assist in the evaluation of regulatory
change to promote outcomes that meet the needs of all stakeholders.
To influence policy our interactions with government and policy
teams at regulators include face-to-face and virtual meetings,
written responses to discussion papers and consultations, ad-hoc
communications and attendance at roundtables with industry peers.
With our experience in various sectors, we can explain how proposed
policy translates into practice and identify potential issues or
unintended consequences that might arise.
When such regulatory changes move
to the implementation stage, we undertake detailed gap analysis
work and depending on the scale of the work required, establish
project management arrangements with first and second-line teams
working together. This is to ensure we delivery regulatory change
effectively and efficiently, minimising disruption to our
operations.
|
We have seen continued elevated
levels of mortality in both the UK and the US. The causes are
unclear, but may reflect indirect impacts of Covid 19 related
illness, and the deferral of diagnostics and medical treatments for
other conditions. There remains continued uncertainty as to the
impacts of "long covid". Continued cost of living pressures and
government spending decisions also have the potential to affect
mortality outcomes.
Along with the emergence of new
diseases and changes in immunology impacting mortality and
morbidity assumptions, other risk factors that may impact future
reserving requirements include a significant advance in medical
science leading to more effective treatments, beyond that
anticipated, requiring adjustment to our longevity
assumptions.
Beginning 2024, the UK will enforce
a 15% global minimum tax to multi-national firms, following OECD
rules. Bermuda's new Corporate Income Tax will be effective from 1
January 2025. The Group is expected to be liable to UK top-up tax
in 2024 and Bermuda corporate tax from 2025 on profits arising from
its Bermuda reinsurance hub. We are actively working with relevant
bodies on the implementation of these new legislations.
Changes in capital standards, both
in the UK and elsewhere, could impact our reported solvency
position and dividend policy.
Post-Brexit, the UK is reforming
its capital regime to move from Solvency II to Solvency UK. The key
changes are designed to enable annuity product providers to invest
more broadly to diversify risk and support investment in the UK
economy. A 65% reduction in the Risk Margin took effect at the end
of 2023, with reform of the Matching Adjustment due in 2024. We are
actively engaging with the PRA on the new regime's details and
working to implement the required changes.
The Bermuda Monetary Authority
("BMA") revised its capital regime for life insurers in 2023, with
changes effective from March 2024. The impact of the proposed
changes on L&G's business is expected to be modest.
The International Association of
Insurance Supervisors ("IAIS") is finalising the Insurance Capital
Standards ("ICS"), a global minimum standard capital for
Internationally Active Insurance Groups ("IAIGs"). The ICS is
expected to be adopted end-2024. L&G Group, designated an IAIG
by the PRA, has actively participated in consultations on the
standard. If Solvency UK is considered as strong as the ICS, it may
be used for ICS compliance and therefore would result in little
impact on L&G Group. We will continue to engage with both the
PRA and the IAIS during this period.
|
RISKS AND UNCERTAINTIES
|
RISK MITIGATION
|
OUTLOOK
|
Failure to effectively implement financial services regulatory
or legislative change in a timely manner could lead to regulatory
censure, reputational damage and deteriorating customer
outcomes.
We are exposed to several risks
where effective identification and implementation of regulatory
changes are particularly important. These include changes relating
to our management of operational risk, conduct risk, climate risk
and health & safety risk. The magnitude or scope of some
regulatory changes can have a bearing on our ability to deliver our
overall strategy.
Regulatory or legislative changes
can have a significant impact on our business. Such changes could
limit our ability to operate in certain markets or sectors,
potentially leading to a reduction in our customer base and
revenue.
There is a risk that regulatory
policies could develop in a manner that is detrimental to our
business and/or customers. Alternatively, it could develop in a way
that presents opportunities, but we fail to revise our strategy and
adapt quickly enough to benefit.
Non-compliance with new regulations
or legislation could potentially damage our reputation. This could
lead to a loss of customer trust and result in regulatory
sanctions.
|
We identify, track and review the
impact of regulatory change through our internal control processes,
with material updates being considered at the Executive and Group
Risk Committees and the Group Board. Our processes are designed to
ensure compliance with all new and developing
regulation.
We actively engage with appropriate
regulatory bodies to ensure we maintain high standards of business
and deliver for our customers.
In 2023 we successfully implemented
the Consumer Duty for open products, with our work on legacy
products well underway. We have also made progress on our
implementation of the UK's operational resilience rules which are
due to come into force in March 2025.
We seek to influence the direction
of travel on various regulatory policy themes at government and
regulator level for the benefit of our customers and other
stakeholders. We have advocated on the development of the Consumer
Duty, pension reforms, sustainability and diversity and
inclusion.
|
The volume and burden of regulatory
change remains high across the sectors we operate in. We analyse,
interpret and implement all relevant financial services legislation
and regulation impacting our business units ensuring appropriate
levels of governance and assurance.
Key forthcoming developments in our
risk areas include:
Operational risk: work is underway
to comply with the UK's new operational resilience rules by 31
March 2025 and similar developing rules in other
jurisdictions
Conduct risk: the FCA continues to
focus on Consumer Duty, with closed book products in scope from 31
July 2024. Discussions are ongoing about the advice/guidance
boundary and a proposal for 'targeted support' to close the advice
gap. In 2024, new rules on diversity and inclusion in financial
services are expected, likely leading to increased data collection,
disclosure and reporting requirements. We
maintain a focus on minimising the risks of financial crime for our
customers and on our financial results.
Climate risk: there are a variety
of moving pieces in the development of climate regulation at the
UK, the US and EU level. We anticipate more focus on scenario
testing and scrutiny on sustainability claims following the FCA's
new anti-greenwashing rule and Sustainability Disclosure
Regulations effective from 31 May 2024. We're awaiting the UK Green
Taxonomy and implementation of ISSB disclosure
standards.
Health & Safety: we have
enhanced our governance processes and developed a 3-year strategy
focusing on culture, quality, consistency, technology, and keeping
pace with change. Registration requirements for the new
Buildings Safety Act were met by the October 2023
deadline.
Strategic risk: we continue to
follow the development of the government's Mansion House reforms
and wider pensions reforms, such as the Pensions Dashboard
work.
|
The success of our operations is dependent on the ability to
attract and retain highly qualified professional
people.
The Group aims to recruit, develop
and retain high quality individuals. We are inherently exposed to
the risk that key personnel or teams of expertise may leave the
Group, with an adverse effect on the Group's businesses. As we
increasingly focus on the digitalisation of our businesses, we are
also competing for data and digital skill sets with other business
sectors as well as our peers.
|
We seek to ensure that key
personnel dependencies do not arise, through employee training and
development programmes, remuneration strategies and succession
planning.
Our processes include the active
identification and development of talent within our workforce, and
by the highlighting our values and social purpose, promoting Legal
& General as a great place to work. As well as investing in our
people, we are also transforming how we engage and develop
capabilities, with new technologies and tools to support
globalisation, increase productivity and provide an exceptional
employee experience.
|
Competition for talent remains
strong with skills in areas such as technology and digital
particularly sought after across many business sectors, including
those in which we operate. We also recognise the risks posed by the
outlook for inflation in salary expectations across the wider
employment market, and internally we have taken steps to help our
employees through direct financial support and by providing advice
and resources to help them manage their financial
well-being.
|
RISKS AND UNCERTAINTIES
|
RISK MITIGATION
|
OUTLOOK
|
New entrants and/or technology may disrupt the markets in
which we operate.
There is already strong competition
in our markets, and although we have had considerable past success
at building scale to offer low-cost products, we recognise that
markets remain attractive to new entrants.
We are also cognisant of
competitors who may have lower return on capital requirements or be
unconstrained by Solvency II.
The continued evolution of AI has
the potential to be a significant disrupting force across our
businesses, for example by enabling new entrants to compete with
potentially lower costs, and more efficient processes. The
technology itself could have an impact on asset valuations, and on
our liabilities including through its impact on the effectiveness
of life sciences and health care systems.
|
We continuously monitor the factors
that may impact the markets in which we operate, including evolving
domestic and internal capital standards, and are maintaining our
focus on our digital platforms.
We have responded to the rapid
advancement and accessibility of generative AI capabilities from
third parties by launching a central AI Accelerator programme. This
initiative brought together colleagues across the Group to shape
and incubate our generative AI approaches, raise awareness and
educate our business, and deliver a secure environment for internal
test and learn use cases.
Our regulatory developments team
keeps a close watch on the AI landscape across all our regulators.
We are actively engaged in numerous consultations in relation to AI
and generative AI.
|
We observe a continued acceleration
of a number of trends, including greater consumer engagement in
digital business models and on-line servicing tools. In the current
operating environment, businesses like ours have transformed
working practices, and we anticipate further investment in
automation, using robotics and machine learning to enhance business
efficiency. We are deepening our understanding of the impacts of AI
on our businesses and in the wider sector.
Our businesses are also well
positioned for changes in the competitive landscape that may arise
from pensions-related changes. We welcome innovation in the market,
such as the proposed roll out of defined benefit 'superfund'
consolidation schemes, as long as the security of members' benefits
is prioritised. We may see alternative de-risking offerings coming
to the market targeting a similar segment to superfunds.
The pension dashboards initiative
will also be a positive development. Legislation is being
introduced in 2024 to make providing a qualifying pensions
dashboard service a regulated activity, and it is likely we will
see firms apply for this.
On the 'collective' defined
contribution reform, while we have seen limited demand for this to
date, it holds the potential to disrupt both the workplace and
retirement income market.
|
Notes
A copy of this announcement can be
found in "Results, Reports and Presentations", under the
"Investors" section of our shareholder website at
https://group.legalandgeneral.com/en/investors/results-reports-and-presentations.
A presentation to analysts and
investors will take place at 10:00am UK time today at One Coleman
Street, London, EC2R 5AA. There will also be a live webcast
of the presentation that can be accessed at
https://group.legalandgeneral.com/en/investors.
A replay of the presentation will
be made available on this website by 7 March 2024.
Financial Calendar
|
Date
|
Ex-dividend date (2023 final
dividend)
|
25 April
2024
|
Record date
|
26 April
2024
|
Annual General Meeting
|
23 May
2024
|
Dividend payment date
|
6 June
2024
|
2024 interim results
announcement
|
7 August
2024
|
Ex-dividend date (2024 interim
dividend)
|
22 August
2024
|
Record date
|
23 August
2024
|
Dividend payment date
|
27 September
2024
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Definitions
Definitions are included in the
Glossary in L&G Full Year Results 2023 Part 2.
Forward-looking
statements
This report may contain
'forward-looking statements' with respect to the financial
condition, performance and position, strategy, results of
operations and businesses of the company and the Group that are
based on management's current expectations or beliefs, as well as
assumptions and projections about future events. These forward-
looking statements can be identified by the fact that they do not
relate only to historical or current facts. Forward-looking
statements often use words such as 'aim', 'ambition', 'may',
'could', 'will', 'expect', 'intend', 'estimate', 'anticipate',
'believe', 'plan', 'seek', 'continue', 'milestones', 'outlook',
'target', 'objectives' or other words of similar meaning. By their
very nature, forward-looking statements are subject to known and
unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and the Group's plans and
objectives, to differ materially from those expressed or implied in
the forward-looking statements. Recipients should not place undue
reliance on, and are cautioned about relying on, any
forward-looking statements.
There are several factors which
could cause actual results to differ materially from those
expressed or implied in forward-looking statements. The factors
that could cause actual results to differ materially from those
described in the forward-looking statements include (but are not
limited to): changes in global, political, economic, business,
competitive and market forces or conditions; future exchange and
interest rates; changes in environmental, social or physical risks;
legislative, regulatory and policy developments; risks arising out
of health crises and pandemics; changes in tax rates, future
business combinations or dispositions; and other factors specific
to the Group. Any forward-looking statement contained in this
document is based on past or current trends and/or activities of
the Group and should not be taken as a guarantee, warranty or
representation that such trends or activities will continue in the
future. No statement in this document is intended to be a profit
forecast or to imply that the earnings of the Group for the current
year or future years will necessarily match or exceed the
historical or published earnings of the Group. Each forward-looking
statement speaks only as of the date of the particular statement.
Except as required by any applicable laws or regulations, the Group
expressly disclaims any obligation to revise or update any forward-
looking statement contained within this document, regardless of
whether those statements are affected as a result of new
information, future events or otherwise.
Caution about climate
information
Annual Report and Accounts
contains climate and ESG disclosures which use a large number of
judgments, assumptions and estimates in connection with involved
complex issues. The ESG disclosures should be treated with special
caution, as ESG and climate data, models and methodologies are
often relatively new, are rapidly evolving and are not of the same
standard as those available in the context of other financial
information, nor are they subject to the same or equivalent
disclosure standards, historical reference points, benchmarks,
market consensus or globally accepted accounting principals. These
judgments, assumptions and estimates are likely to change over
time, in particular given the uncertainty around the evolution and
impact of climate change. In addition, the Group's climate risk
analysis and net zero strategy remain under development and the
data underlying the analysis and strategy remain subject to
evolution. As a result, certain climate and ESG disclosures made in
this report are likely to be amended, updated, recalculated or
restated in future reports. This statement should be read together
with the Cautionary statement contained in the Group's latest
Climate and nature report. The information, statements and opinions
contained in the Annual Report and Accounts
do not constitute an offer to sell
or buy or the solicitation of an offer to sell or buy any
securities or financial instruments nor do they
constitute any advice or
recommendation with respect to such securities or other financial
instruments or any other matter.
Going concern statement
The Group's business activities,
together with the factors likely to affect its future development,
performance and position in the current economic environment are
set out in the Annual Report & Accounts. The financial position
of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Group Results. Principal risks and
uncertainties are detailed on pages 56 to
59.
The directors have made an
assessment of the Group's going concern, considering both the
current performance and the outlook for a period of at least, but
not limited to, 12 months from the date of approval of the
consolidated financial statements, using the information available
up to the date of issue of the Annual Report &
Accounts.
The Group manages and monitors its
capital and liquidity, and applies various stresses, including
adverse inflation and interest rate scenarios, to those positions
to understand potential impacts from market downturns. Our key
sensitivities and the impacts on our capital position from a range
of stresses are disclosed in section 5.01 of the Capital section of
the Full year results in this 2023 Preliminary Management Report.
These stresses do not give rise to any material uncertainties over
the ability of the Group to continue as a going concern. Based upon
the available information, the directors consider that the Group
has the plans and resources to manage its business risks
successfully and that it remains financially strong and well
diversified.
Having reassessed the principal
risks and uncertainties (both financial and operational) in light
of the current economic environment, as detailed on pages
56 to 59, the
directors are confident that the Group and company will have
sufficient funds to continue to meet its liabilities as they fall
due for a period of, but not limited to, 12 months from the date of
approval of the financial statements and therefore have considered
it appropriate to adopt the going concern basis of accounting when
preparing the financial statements.
Directors' responsibility
statement
We confirm to the best of our
knowledge that:
·
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The Group financial statements
within the full Annual Report & Accounts, from which the
financial information within this preliminary announcement has been
extracted, and which have been prepared in accordance with
UK-adopted IFRSs, give a true and fair view of the assets,
liabilities, financial position and profit of the Group;
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·
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The preliminary announcement
includes a fair review of the development, performance and position
of the Group, as well as the principal risks and uncertainties
faced by the Group; and
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·
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The directors of Legal &
General Group Plc are listed in the Legal & General Group Plc
website:
https://group.legalandgeneral.com/en/about-us/our-management/group-board
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By order of the Board
António Pedro dos Santos
Simões
Group Chief Executive
Officer
5 March 2024
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Stuart Jeffrey Davies
Group Chief Financial
Officer
5 March 2024
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Enquiries
Investors
+44 203 124 2091
Edward Houghton, Group Strategy
& Investor Relations Director
investor.relations@group.landg.com
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+44 203 124 4415
Gregory Franck, Investor Relations
Director
investor.relations@group.landg.com
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+1 240 397 0053
Blake Carr, Investor Relations
Director
investor.relations@group.landg.com
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Media
+44 738 443 5692
Natalie Whitty, Group Corporate
Affairs Director
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+44 794 651 4627
Lauren Kemp, Group Head of Corporate
Media & Issues
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+44 778 857 7637 / +44 780 069
4425
Lucy Legh / Nigel Prideaux, Headland
Consultancy
LandG@headlandconsultancy.com
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