Legal & General: Full Year Results 2017

Continuing strong performance in 2017: EPS¹ 31.9p, Return on equity 25.6%

Financial highlights²:

• Operating profit up 32% to £2,055m (2016: £1,562m)
• Profit before tax³ up 32% to £2,090m (2016: £1,582m)
• Profit after tax up 50% to £1,902m (2016: £1,265m)
• Full year dividend up 7% to 15.35p per share (2016: 14.35p)
• 2017 results include mortality release⁴ of £332m
• Operating profit from continuing operations⁵ excluding mortality release up 12% to £1,616m (2016: £1,447m)
• Net release from continuing operations⁵ up 9% to £1,352m (2016: £1,242m)
• One-off us tax benefit⁶ of £246m
• Solvency II coverage ratio⁷ of 189% (2016: 171%)
• Solvency II net surplus generation of £1.2bn (2016: £1.1bn)

Business highlights:

• PRT⁸ and individual annuity new business of £4.6bn (2016: £4.1bn)
• Lifetime mortgage advances of £1.0bn (2016: £0.6bn)
• LGIM external net flows up 49% at £43.5bn (2016: £29.2bn)
• LGIM AUM up 10% at £983.3bn (2016: £894.2bn)
• Group-wide direct investment up 44% at £14.4bn (2016: £10.0bn)
• LGI gross premiums up 5% to £2.5bn (2016: £2.4bn)

Nigel Wilson, Group Chief Executive, said:

“Legal & General’s strategic focus, alignment to global growth drivers and excellent execution, allowed us to deliver a record £2.1bn operating profit in 2017. Our shareholders are enjoying terrific EPS and RoE growth, while our ‘inclusive capitalism’ model ensures customers and society also benefit.

Our scale businesses continued to successfully scale-up: LGIM’s external net inflows were £44bn, taking us to almost £1 trillion in AUM. Customer focus and good value made us market leaders in our chosen UK business segments, while successfully expanding in the US where LGR broke new ground, completing fifteen Pension Risk Transfer deals.

Our transformative, innovative businesses treat disruption as a privilege and a responsibility. Many of our initiatives are changing markets in the customer’s favour, including SmartQuote, Smart Pensions, SalaryFinance, our housing businesses, Pemberton and NTR.

We remain confident that our unique business model, strong management team, collaborative culture, and strategic focus can deliver further growth in 2018 and beyond.”

1. Earnings per share is calculated by dividing profit after tax attributable to equity holders of the Company, by the weighted average number of ordinary shares in issue during the period. Represents profit before tax attributable to equity holders. Excluding mortality releases and one-off US tax benefit, 2017 EPS is 23.10p (2016:21.22p).
2. The metrics within the Group’s financial highlights are defined in the glossary, which includes Alternative Performance Measures, on pages 93 to 99 to this report.
3. Represents profit before tax attributable to equity holders.
4. Mortality releases from LGR’s £46.5bn of net longevity exposure comprises £206m relating to changes in longevity improvement assumptions to align to CMI 2015 tables, and a £126m base mortality release as reported in H1 2017.
5. Excludes businesses disposed of comprising Mature Savings, Legal & General Netherlands, Suffolk Life, Cofunds and IPS.
6. Reflects the revaluation of net deferred tax liabilities in the US, largely relating to the protection business following the US corporate income tax rate reduction from 35% to 21%.
7. Solvency II surplus and coverage ratio on a shareholder basis is adjusted for the Own Funds and SCR of the With-profits fund and the final salary pension schemes.
8. Pension Risk Transfer (PRT).