Strategic Overview

Legal & General’s strategic focus is on three broad categories of business: Risk, Savings and Investment Management. The Business Review describes these businesses in more detail, and provides separate commentary on the International segment.

1. Risk

Includes life assurance and other forms of financial protection for individuals, group protection through employers’ schemes, individual and bulk purchase annuities, and general insurance. Risk businesses can require significant capital commitment and can earn commensurate margins given appropriate pricing and scale. Legal & General’s strength in these markets is founded on a strong balance sheet and the ability to assess, price and manage these risks expertly.

2. Savings

Enables individuals to accumulate and manage their savings for the medium and long term. We provide both with-profits and non profit products. Our product range includes ISAs and Unit Trusts, investment bonds and pensions provided both direct to individuals and through their employer. Products are structured and priced to provide good value to the saver, and can be bought through a variety of channels. Legal & General’s success is underscored by product and investment expertise, financial strength and administrative capability.

3. Investment Management

Aggregates our customers’ funds and those of third party institutions such as pension funds, investing them so as to maximise the benefits of our market leading scale, specialist skills and experience. We invest on our clients’ behalf based on their preferred risk approach, and offer a range of passive and active fund management products. Legal & General Investment Management’s (LGIM’s) position as one of the UK’s largest fund managers means we can provide a highly competitive combination of cost and service.

Five strategic imperatives or principles, which are summarised here, guide our business. The application of these principles is reflected in our Key Performance Indicators, which measure the Group’s financial success. We use other indicators and achievements to record progress elsewhere. Some of these, including those pertaining to customers, employees and Corporate Social Responsibility are covered in later sections of this Report.

1. Diversified Business

We aim to diversify earnings streams across, and within, our three core businesses, so as to minimise reliance on any single area. We assess markets on the basis of their potential for profitable growth, our share of market and the required resource commitment in both financial and human capital. We seek to make best use of our skills across different markets and maximise synergies.

2. High Quality Products, Broad Distribution

The creation of a stable stream of high quality new business is a key driver of our business. We believe that this is achieved through products which offer demonstrable value to the customer, distributor and ourselves. Central to our new business model is the maintenance of diversified distribution capability. We do not wish to be overly dependent on any single distributor or distribution category. Building scale in diversified markets creates an ability to maintain growth as distribution patterns shift.

3. Positive Customer Experience

We recognise that long term relationships are at the heart of a long term business. We work hard to ensure that we develop relationships with all our customers and distributors on mutually beneficial terms. This means that we ensure that customers are treated fairly and efficiently throughout their relationship with us. By managing our existing customer business well, we can encourage them to stay with us and hold our products longer. This greater persistency in turn helps grow the embedded value of our business.

4. Financial Strength

Achieving profitable growth for shareholders and security for customers requires a robust, well-designed capital structure. We aim to have the right amount of capital, of the right type, deployed in the right places. Our capital strength, which is subject to annual review and rigorous stress testing, is evidenced by our strong credit rating, which we regard as a strategic differentiator.

5. High Performing Organisation

Our employees are a vital asset: they are strongly committed to the success of the business, and to an ethical approach which is focused on ‘doing the right thing’ for customers, shareholders and colleagues. Strategically, we seek to build on our existing cultural strengths, to involve all employees in our goal of continuous improvement to the business, and to enable each employee to maximise their personal contribution, and that of their team members, to the business.