L&G Half Year Results 2024 Part 1

Legal & General Group Plc

07 August 2024

 

Half Year 2024 Results

Stable core operating profit, strong solvency at 223%, good progress on private markets fund launches

António Simões, CEO         

"These results reflect the ongoing strength of our business, with core operating profit slightly ahead of the prior year and a solvency coverage ratio of 223%. We continue to expect 2024 core operating profit to grow by mid-single digits year-on-year.

At our Capital Markets event in June we set out our strategy to deliver L&G's next phase of sustainable growth and enhanced returns, through focused capital allocation and rigour in execution. We are pleased to announce a 5% increase in interim dividends per share, and progress in undertaking a £200m share buyback, consistent with our new capital return framework.

We are making clear progress on delivering against our strategy, notably in the establishment of a single asset manager. We have good momentum in private markets, launching a new fund to offer diversified exposure to Defined Contribution pension scheme members, and establishing our Affordable Housing fund, leveraging pension capital to build new homes.

These developments are important steps forward for L&G, reflecting our commitment to helping address the long-term investment needs of individuals and society, and create compelling opportunities for partners to invest alongside us to generate positive change. We are encouraged by the action being taken here in the UK to drive institutional capital towards productive assets, alongside progress on addressing structural barriers to investment, such as the planning system.

Looking ahead, we are well positioned to continue to execute our strategy with pace and ambition, delivering growth and value for all our stakeholders."

Stable financial performance¹

·    Core operating profit of £849m (H1 2023: £844m)

·    Core operating EPS of 10.58p (H1 2023: 10.52p)

·    Operating ROE of 35.4% (H1 2023: 28.6%)

·    Profit after tax² of £223m (H1 2023: £377m)

·    Asset Management AUM of £1,136bn (H1 2023: £1,170bn) of which Private Markets £52bn (H1 2023: £48bn)

·    Solvency II capital generation of £897m (H1 2023: £947m)

·    Solvency II coverage ratio³ of 223% with surplus of £8.8bn (FY 2023: 224%, £9.2bn)

·    Interim dividends per share of 6.00p, up 5% (H1 2023: 5.71p)

Growth in our store of future profit: up 7% year on year to £14.5bn⁴

·    £5bn of PRT written or exclusive year to date; £24bn+ of active UK PRT deals⁵

·    Record Retail volumes in individual annuities and US protection; continued growth in Workplace DC:

‒   £1.2bn of individual annuities, more than double that of the prior year (H1 2023: £575m)

‒   $103m of US protection new business premium, up 18% (H1 2023: $87m)

‒   Workplace DC net flows of £3.2bn, up 7% (H1 2023: £3.0bn)

·    New business CSM contributed £326m (H1 2023: £475m), reflecting lower PRT volumes

·    CSM has grown 8% to £13.0bn (H1 2023: £12.0bn)

1. The Group uses a number of Alternative Performance Measures to enhance understanding of the Group's performance. These are defined in the glossary, on pages 87-92.

2. Profit after tax attributable to equity holders.

3. Solvency II coverage ratio before the payment of 2024 interim dividend and after the £200m buyback.

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. £5bn PRT comprises H1: £1.5bn; H2: £1.1bn, plus exclusive: £2.3bn. Most of the £24bn+ pipeline is expected to transact in 2024.

Financial summary¹

£m	H1 2024	H1 2023	Growth (%)
Analysis of core operating profit
Institutional Retirement	560	530	6
Asset Management	214	249	(14)
Retail	268	252	6
Group debt costs	(107)	(106)	(1)
Group investment projects and expenses	(86)	(81)	(6)
Core Operating profit2	849	844	1
Corporate Investments unit	71	80	(11)
Operating Profit2	920	924	-
Investment variance from Core businesses (incl. minority interests)	(417)	(296)	(41)
Investment variance from Corporate Investments	(187)	(235)	20
Profit before tax attributable to equity holders2	316	393	(20)
Profit after tax attributable to equity holders	223	377	(41)
Core Operating Earnings per share2 (p)	10.58	10.52	1
Operating ROE2 (%)	35.4	28.6	7
Contractual Service Margin (CSM)2	12,965	12,002	8
Solvency II
Operational surplus generation	897	947
Coverage ratio (%)	223
Half year dividends per share (p)	6.00	5.71	5

1.  Comparatives restated to reflect the creation of Corporate Investments Unit and movement of LGC assets to Institutional Retirement, Retail Annuities and Asset Management. The H1 2023 result also includes adjustments in relation to IFRS 17 made as part of the finalisation of the Group's 2023 Accounts. These adjustments reduced H1 2023 operating profit by £17m and were fully reflected in the FY 2023 results. For further information please see Note 2.01.

2.  Alternative Performance Measure as defined on pages 84-86.

H1 2024 Financial performance

Income statement

H1 2024 operating performance was stable, with core operating profit of £849m slightly ahead of the prior year (H1 2023: £844m) consistent with the guidance we gave at our Capital Markets event in June.  We continue to expect 2024 core operating profit to grow by mid-single digits year on year.

Institutional Retirement operating profit increased by 6% to £560m (H1 2023: £530m) underpinned by the growing scale of back-book earnings and the consistent investment performance of our annuity portfolio. Following a record year for UK Pension Risk Transfer (PRT) in 2023, H1 volumes reflect lower quoting activity in the wider market. In H1 we have written £1,543m of global PRT (H1 2023: £4,992m). Despite the slower start to the year, we have now written or are exclusive on £5bn and our pipeline for PRT is larger than ever. We continue to expect elevated PRT volumes over the next decade.

Asset Management delivered operating profit of £214m (H1 2023: £249m). This reflects the increased investment signalled at the Capital Markets event in June. Revenues have increased by 6% reflecting a conscious shift towards higher margin business illustrated by UK DC and Wholesale, despite lower average AUM. Pemberton continues to make good progress in raising and deploying capital. This has been reflected in a valuation uplift which is lower than the prior year.

Retail operating profit increased by 6% to £268m (H1 2023: £252m) driven by Retail Retirement, up 13% (from £144m at H1 2023 to £163m at H1 2024) due to the unwind of a larger back-book which reflects strong 2023 performance. Retail Annuity sales continue to be strong, with volumes in H1 2024 of £1.2bn, double that of the prior year. Workplace DC net flows were £3.2bn and total members are now up to 5.3 million.

Profit before tax attributable to equity holders was £316m (H1 2023: £393m), reflecting investment and other variances from core businesses of £(417)m (H1 2023: £(296)m). This was mostly driven by the impact on our annuity portfolio of the increase in interest rates of 64bps[1] and movements in inflation expectations both in line with our published sensitivities, as well as some non-recurring IFRS 17 modelling refinements. The investment variance from Corporate Investments of £(187)m (H1 2023: £(235)m) was largely driven by the write down in valuation of Salary Finance, as we consider options to manage the business outcome in the best interests of customers and shareholders.

Balance sheet and asset portfolio

Solvency II operational surplus generation (OSG) at £897m (H1 2023: £947m) reflects the impact of higher interest rates, which have reduced both our aggregate solvency capital requirement and capital generation from Asset Management. Net surplus generation (NSG) was £731m (H1 2023: £752m) reflecting lower operational surplus generation, partially offset by the impact of lower UK PRT volumes and therefore a lower quantum of new business capital strain.

Solvency II coverage ratio is strong at 223% (FY 2023: 224%).

Our operating return on equity[2] was 35.4% (H1 2023: 28.6%).

Our store of future profit increased by 7% to £14.5bn (H1 2023: £13.5bn), with the CSM up 8% to £13.0bn (H1 2023: £12.0bn), reflecting contributions from our growing annuity businesses and the routine longevity review in H2 2023. Risk Adjustment of £1.5bn is in line with H1 2023 (£1.5bn).

Our diversified, actively managed annuity portfolio has continued to perform resiliently. 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 Strategy

At our Capital Markets event in June we set out a strategy for delivering the next phase of sustainable growth and enhanced returns to shareholders. We are targeting:

·    6-9% CAGR in core operating EPS (2024-27) at >20% operating Return on Equity

·    £5-6bn cumulative Solvency II capital generation over three years (2025, 2026, 2027)

The Board intends to return more to shareholders over the period 2024-27 through a combination of dividends (5% DPS growth to FY24, 2% DPS growth per annum 2025-27) and buybacks (with a first buyback of £200m in 2024 and further similar buybacks).

We have well-positioned, capital generative businesses in Institutional Retirement, Asset Management and Retail. Our divisions have strong complementary synergies and a shared sense of purpose, which together create significant competitive advantages for the Group. Making the most of these synergistic benefits is a core tenet of our strategy.

Our long-term vision for the Group requires near-term investment in our operating model to position us for structural growth trends in Asset Management and Retail. This in turn will move the business towards a more capital-light model.

Successful execution will require sharper focus. We have a disciplined approach to capital allocation and we have simplified the Group by creating a single asset manager and a Corporate Investments unit. We are committed to doing things 'once and well', leading to efficiencies in operations.

Our three divisions

·    Institutional Retirement is a market leader in UK PRT and with a growing presence internationally, in the US and via our global reinsurance hub in Bermuda. We are well placed to address the significant growth in the global PRT market over the next decade. The economics are attractive, with our growing portfolio set to release reliable earnings over decades from our store of future profit (H1 2024: £9.0bn). Our total annuity portfolio - comprising both Institutional and Individual annuities - stands at £84bn as at H1 2024. It acts as a valuable source of permanent capital to cornerstone new investment strategies.

Key metrics: Guidance of £50-65bn UK PRT at <4% strain (2024-28), 5-7% operating profit CAGR (FY23-28)

·    Asset Management is a newly created division, formed from the combination of LGIM (Legal & General Investment Management) and LGC (Legal & General Capital). It is a leading global asset manager with £1.1trn AUM, of which 41% is international. It has significant market share of the UK pensions industry, which supports the growth of our other divisions - e.g. conversion of our strong Defined Benefit (DB) client relationships into buy-out partners for Institutional Retirement.

Private markets will be a major driver of Asset Management growth both directly in L&G and through our origination partners (e.g. Pemberton). We can access and originate differentiated investment opportunities in private credit, real estate and infrastructure for our clients and for our annuity balance sheet as it grows.

Key metrics: £500-600m operating profit (2028), £100-150m cumulative ANNR[3] (2025-28), £85bn+[4] private markets AUM (2028)

·    Retail is a leading provider of UK retail retirement and protection solutions, and US term life insurance. We support customers throughout their lifetime and create valuable bundled propositions, leveraging our Asset Management capabilities, as responsibility for retirement savings shifts from employers to individuals. We will leverage technology to engage customers effectively and efficiently at scale.

Key metrics: 6-8% operating profit CAGR (FY23-28), £40-50bn Workplace net flows (2024-28)

Our capital allocation policy

We have a clear allocation policy which prioritises:

·    A strong and sustainable balance sheet, supported by strong capital generation from our divisions

·    Investment for growth, with disciplined investment in organic growth and potential bolt-on acquisitions in Asset Management

·    Shareholder returns, with surplus capital to be returned to shareholders in the form of dividend or buybacks

Capital from disposals will be deployed in line with this capital allocation policy.

Returning capital to shareholders

As noted, the Board intends to return more to shareholders over 2024-2027 than the equivalent of maintaining 5% per annum growth in dividends per share (DPS). This is intended to be achieved through a combination of dividends and buybacks with:

·    5% DPS growth to FY24 and, thereafter, 2% DPS growth per annum out to FY27

·    A first buyback of £200m in 2024 and further similar buybacks over the subsequent period

As at 5 August we had bought back 40m shares, comprising 46% of the £200m buyback. The full amount has been accrued for in IFRS and Solvency II.

All future capital returns will be subject to the market environment, our views on solvency buffers, and opportunities for investment in the business, including Institutional Retirement.

In line with this approach, the Board has recommended an interim dividend of 6.00p, up 5% from the prior year (5.71p).

Institutional Retirement

FINANCIAL HIGHLIGHTS1 £m			H1 2024	H1 2023
Contractual service margin release			316	267
Risk adjustment release			64	54
Expected investment margin			283	292
Experience variances			(20)	(18)
Non-attributable expenses			(86)	(68)
Other			3	3
Operating profit			560	530
Investment variance from longevity assumption change			-	-
Other investment variance			(263)	(183)
Profit before tax attributable to equity holders			297	347
Contractual service margin (CSM)2			8,321	7,511
Risk adjustment (RA)2			650	639
Total store of future profit			8,971	8,150
CSM release as a % of closing CSM pre release			3.7%	3.4%
New business CSM2			135	307
New business RA2;3			(48)	24
Total new business future profit			87	331
UK PRT			1,126	4,866
International PRT			417	126
Total new business (Gross Premiums)			1,543	4,992
Funded reinsurance premiums			-	(816)
Total new business (net of Funded Reinsurance)			1,543	4,176
Institutional annuity assets4 (£bn)			66.3	61.4
Shareholder assets5 (£bn)			3.2	3.3

1. Comparatives restated to reflect the movement of assets from LGC to Institutional Retirement. For further information please see Note 2.01.

2. H1 2023 numbers restated to reflect adjustments in relation to IFRS 17 made as part of the finalisation of the Group's 2023 Accounts.

3. The H1 2024 RA includes a £(56)m impact from funded reinsurance on the 2023 Boots Pension Scheme transaction which was put in place after year-end.

4. In the UK, annuity assets across Institutional Retirement and Retail are managed together. We show here estimated Institutional Retirement annuity assets. Excludes derivative assets.

5. Assets formerly reported in LGC.

Institutional Retirement continued to deliver strong operating profit, up 6% to £560m

Contractual Service Margin (CSM) release increased 18% to £316m (H1 2023: £267m). This reflects the growth in our store of future profit which is supported by profitable new business written and the routine longevity review in H2 2023.  In H1 2024, 3.7% of the closing CSM pre-release (£8.6bn) was released into profit (H1 2023: 3.4%, £7.8bn).  Overall, the CSM grew 11% to £8.3bn (H1 2023: £7.5bn).

The expected investment margin decreased by 3% to £283m (H1 2023: £292m) reflecting less backbook optimisation in H1 2024 vs H1 2023.

Non-attributable expenses of £(86)m (H1 2023: £(68)m) are broadly in line with the H2 2023 run-rate (£92m).

Profit before tax of £297m (H1 2023: £347m) was impacted by investment and other variances of £(263)m. This was mostly driven by increases in interest rates and movements to inflation expectations, in line with our year-end sensitivities. There are also some non-recurring IFRS 17 modelling refinements.

£5bn PRT volumes written or exclusive year to date and a strong pipeline for H2 2024

During H1 2024, we wrote £1.5bn of global PRT new business across 15 deals (H1 2023: £5.0bn across 20 deals). UK volumes were £1.1bn (H1 2023: £4.9bn) due to quieter quoting activity in H1, and international volumes were £0.4bn (H1 2023: £0.1bn). Despite the slower start to the year, we have now written or are exclusive on £5bn year to date and have £24bn+ of active deals in the UK pipeline, most of which is expected to transact in 2024.

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 £87m of future profit to the CSM and RA.

The £1.1bn of UK PRT written in H1 delivered a 6.1% UK Solvency II new business margin. The year-on-year reduction in SII new business metrics is driven by the significantly shorter duration of the ICI Pension Fund[5] pensioner-only buy-in which had a duration of less than 8 years. This compares with an average duration for business written over the last three years of 12.7 years.

We continue to be disciplined in our pricing and deployment of capital. We have successfully executed transactions over the last few years, including at H1 2024, at initial UK strain levels below our 4% target. We actively optimise the back-book 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

Institutional Retirement's brand, scale and asset origination capabilities - through synergies and expertise within Asset Management - are critical to our market leadership in the UK PRT market.  Long-term client relationships, typically created and fostered by Asset Management, have allowed us to help many pension plans achieve their de-risking goals, including the large schemes executed at the end of 2023: a £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. This has continued in 2024 with the £1.1bn transaction with SCA UK pension plan[6] in July. In H1 2024 9 out of the 15 deals transacted were with Asset Management clients.

Well positioned to execute in international markets

Institutional Retirement delivered increased US PRT new business premiums of $525m or £417m (H1 2023: $163m; £126m) in a market that is typically slower in H1. This includes a $0.6bn split transaction leveraging our longstanding relationship with RGA. In June, the US Institutional Retirement team and RGA were awarded the Pension Risk Transfer Innovation of the Year award for this split transaction approach that is meeting the evolving needs of pension plan sponsors in the US PRT market.

We are active in the Canadian PRT market, developing our proposition to meet anticipated market needs.  The 2024 market is expected to be cCAD$8-10bn, weighted towards the second half.  We continue to actively participate in the Canadian market and remain disciplined on price with a focus on long-term profitability and shareholder returns.

In the Netherlands, we have developed expertise to actively participate in the PRT market.  We are exploring our partner options for access to this developing PRT market.

Legal & General remains strongly positioned to offer holistic, multinational pension de-risking solutions, leveraging skills and capabilities across geographies.

Asset Management

FINANCIAL HIGHLIGHTS1 £m			H1 2024	H1 2023
Management fee revenue			481	455
Transactional revenue			11	9
Total revenue			492	464
Total costs			(359)	(326)
Operating profit from fee-related earnings			133	138
Operating profit from Balance Sheet investments			81	111
Total Operating Profit			214	249
Investment and other variances			(55)	(40)
Profit before tax			159	209
Asset Management cost:income ratio (%)			73%	70%
NET FLOWS AND ASSETS £bn
External net flows			(28.5)	(12.3)
PRT Transfers			(0.5)	(5.1)
Internal net flows			(2.3)	(1.9)
Total net flows			(31.3)	(19.3)
Persistency2 (%)			84	87
Average assets under management			1,131	1,180
Assets under management ex JV and Associates			1,122	1,158
JV & Associate AUM3			14	12
Total AUM			1,136	1,170
Of which:
- International assets under management4			465	457
- Private Markets5			52	48
- UK DC assets under management			176	146

1.             Comparatives restated to reflect the movement of assets from LGC to Asset Management. For further information please see Note 2.01

2.             Persistency is a measure of client asset retention, calculated as a function of net flows and closing AUM.

3.             Includes 100% of assets managed by associates (Pemberton, NTR, BTR).

4.             International AUM includes assets from internationally domiciled clients plus assets managed internationally on behalf of UK clients.

5.             Private Markets assets includes assets from associates and is based on Managed AUM including £1.5bn from multi-asset strategies.

Total operating profit of £214m (HY 2023: £249m)

At our Capital Markets Event in June we announced the creation of the Asset Management division, bringing together LGIM and LGC to create a single, global, public and private markets asset manager.

Operating profit from fee-related earnings £133m (HY 2023: £138m)

Operating profit from fee-related earnings has decreased due to increased investment, as signalled at the Capital Markets event in June, as we modernise our platform, and invest to drive growth. Revenues have increased by 6% to £492m (H1 2023: £464m), reflecting a conscious shift towards higher margin business, illustrated by Workplace DC and Wholesale, despite lower average AUM.

Operating costs of £359m are 10% higher than H1 2023, driven by investment for growth (c£23m of the £50-100m per annum run rate outlined at the Capital Markets event). Underlying operating expenses are 3% higher than H1 2023 (i.e. lower than UK wage inflation). We will continue to be disciplined in our management of these underlying operating expenses.

Operating profit from Balance Sheet investments £81m (HY 2023: £111m)

Balance Sheet investments are comprised of asset origination platforms such as Pemberton (a private credit manager) and NTR (a specialist renewable energy asset manager); our Affordable Homes and Build to Rent platforms; and our digital infrastructure platform, Kao, alongside Bruntwood SciTech, our specialist property platform serving the UK's innovation economy.

Lower operating profit of £81m reflects a smaller uplift in the valuation of Pemberton. Pemberton has continued to make significant progress in raising and deploying capital. We expect future valuation uplifts to occur as the business continues to successfully launch new funds and deploy capital.

Our investment portfolio grew by 27% to £1,082m in the 12 months to 30 June 2024.

Profit Before Tax and Investment Variances

Profit before tax was £159m, with investment and other variances of £(55)m, driven primarily by the mark-to-market impact on the carrying value of our balance sheet investments.

Supporting clients across key channels and markets

Total AUM (excluding JV and Associates) reduced by 3% year on year to £1,122bn (H1 2023: £1,158bn), while average AUM was 4% lower.

External net flows of £(28.5)bn reflect UK DB clients adjusting their portfolios in response to improved funding ratios, with many now positioning for PRT. As the UK DB market matures, our expertise in preparing schemes to achieve buy out or to "run on", means we are well placed to support clients, with many likely to choose Legal & General as a PRT partner. Over the last three years, 84% of UK PRT new business premiums have come from Asset Management clients including the British Steel Pension Scheme and the Boots Pension Scheme, which insured a combined £13.5bn of pension liabilities.   

Our Defined Contribution (DC) business continues to attract new assets with AUM growth of 21% to £176bn (H1 2023: £146bn), and including external net flows of £3.2bn and £4.8m of ANNR from our workplace business. 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.

Our UK Wholesale AUM has seen 12% growth over H1 2024 which now stands at £61bn (H1 2023: £49bn).  We achieved record gross sales of £13bn and ranked 2^nd across the industry[7]. In particular, our Active Fixed Income strategies and Multi-Asset capabilities have seen strong AUM growth of 19% and 7% in the last year, respectively.

ANNR excluding UK DB is flat, reflecting lower value index rotation outflows, and ETF and Fixed Income outflows in the US.

Investment performance has been strong across our range of matching, tracking and active strategies. For our UK-managed Active Fixed Income strategies, 96% of strategies out-performed over 1 year, and 77% over 3 years. US-managed Active Fixed Income strategies also performed well with 58% of strategies out-performing over both 1 and 3 years. Multi-Asset strategies outperformed by 45% over 1 year and 47% 3 years.

Growing our Private Markets Platform

We are expanding our Private Markets platform, targeting £85bn of private markets AUM by 2028. As at 30 June 2024 we have £52bn in private markets AUM, and £6bn more in committed capital. In the period we generated £4m of ANNR from Private Markets.

On 1 July 2024 we announced the launch of the L&G Private Markets Access Fund, giving UK DC investors new routes to access private markets.  This fund will utilise L&G's Private Markets Platform, offering potential investment opportunities across clean energy, affordable homes, university spin-outs and critical infrastructure and gives our 5.3 million DC members the opportunity to access diversified private markets exposure.

We launched our Affordable Homes fund on 15 July 2024, which to date includes commitment from local government pension funds, ACCESS and Greater Manchester Pension Fund (GMPF). This launch is an exemplar of how we catalyse our own balance sheet investments by offering our clients new investment opportunities while addressing real-world challenges.

Milestones in Private Credit include the launch of a new Short-Term Alternative Finance Fund on 3 April, as we continue to deliver wide-ranging strategies across alternative debt.  Pemberton, our private credit GP investment, has become a leading multi-strategy alternative credit manager in Europe and a top-25 global private debt manager, with total AUM of €21bn. NTR AME, our renewable energy GP partnership, continues to grow, adding renewable power to over 750,000 homes.

We continue to use our principal balance sheet capital to invest in alternative assets that generate profits for our shareholders and positive societal impact, while also providing a pipeline of investable assets to support our fund strategies.

Our Private Markets platform is well positioned to match our strong multi-sector investment propositions and continues to strengthen its operational capabilities to support the growing global demand for our products.

Expanding our global footprint

We continue to successfully diversify the business, growing international AUM by 80% since 2018 to £465bn (41% of overall AUM). 

In the US, we are a leading corporate pension manager with assets for several of the largest asset owners in North America. Our Index Solutions business has witnessed Index Plus AUM growing to c.$9bn since launch in May 2023. We are bringing shorter duration products to market to meet demand as well as expanding our private markets capabilities, through the creation of a real estate equity platform.

In Europe, we have offices across six locations and have seen AUM growth of 8% over the past year to £84.8bn driven by a 31% growth in Active Fixed Income and our scaled Index Equity offerings. Over 20% of our AUM is managed in our active strategies capabilities and smart beta ETF products with an average fee rate of around 17bps.

In Asia, our AUM has grown by 12% over the past year. With offices in Tokyo, Hong Kong and now Singapore, our AUM in Asia including Japan has reached £147bn, and we now have clients across nine countries in the region. In Japan, our AUM has more than doubled since 2019, and we are now Japan's 7^th largest asset manager[8].

Creating a better future through Responsible Investing

Responsible investing is core to our approach and we continue to innovate. In June we published our eighth Climate Impact Pledge, our flagship engagement programme to achieve the goals of the Paris Agreement. We have assessed over 5,000 companies quantitatively and engaged with more than 2,800. As at 30 June 2024, we managed £381.2bn (H1 2023: £331.6bn) in responsible investment strategies explicitly linked to ESG criteria for a broad range of clients.

Retail

FINANCIAL HIGHLIGHTS1 £m			H1 2024	H1 2023
Contractual service margin release			226	210
Risk adjustment release			39	49
Expected investment margin			65	71
Experience variances			10	(25)
Non-attributable expenses			(76)	(40)
Other			4	(13)
Operating profit			268	252
-       US/UK Insurance2			105	108
-       Retail Retirement3			163	144
Investment variance from longevity assumption change			-	-
Other investment variance			(86)	(29)
Profit before tax attributable to equity holders			182	223
Contractual service margin (CSM)4			4,644	4,491
Risk adjustment (RA)4			848	871
Total store of future profit			5,492	5,362
New business CSM4			191	168
New business RA			25	13
Total new business future profit			216	181
Protection new business annual premiums			224	199
Individual annuities single premium			1,174	575
Workplace DC net flows5 (£bn)			3.2	3.0
Lifetime & Retirement Interest Only mortgage advances			140	163
Retail retirement annuity assets6 (£bn)			17.5	16.7
Retail retirement shareholder assets6 (£bn)			0.9	0.9
UK Retail protection gross premiums			760	752
UK Group protection gross premiums			349	295
US protection gross premiums			657	633
Total protection gross premiums			1,766	1,680
Protection New Business Value			106	85
Annuities New Business Value			70	34
Solvency II New Business Value			176	119

1.             Comparatives restated to reflect the movement of assets from LGC to Retail Annuities and Fintech investments into the Corporate Investments unit. For further information please see Note 2.01.

2.             UK Insurance includes Retail protection, Group protection and Mortgage Services.

3.             Retail Retirement includes Individual Annuities, Lifetime Mortgages, Workplace Admin and returns from shareholder assets.

4.             H1 2023 numbers restated to reflect adjustments in relation to IFRS 17 made as part of the finalisation of the Group's 2023 Accounts.

5.             This represents the Workplace DC administration business. Profits on the fund management services we provide are included in Asset Management operating profit.

6.             In the UK, annuity assets across Institutional Retirement and Retail are managed together. Estimated proportion of annuity assets belonging to Retail. Excludes derivative assets.

Operating profit of £268m

In H1 2024, Retail operating profit has increased by 6% to £268m (H1 2023: £252m).  This is due to the growth in CSM release and positive claims experience in the UK, partially offset by higher year-on-year non-attributable expenses which are, however, in line with the H2 2023 run rate (£81m).

The Contractual Service Margin (CSM) release was £226m (H1 2023: £210m), reflecting the release of previously stored insurance profits.  Growth in the CSM release was driven by profitable new business written and assumption changes in the prior year.  In H1 2024, 4.6% of the closing CSM pre-release (£4.9bn) was released into profit (H1 2023: 4.5%, £4.7bn). Overall, the CSM grew by 3% to £4.6bn (H1 2023: £4.5bn).

Profit before tax was £182m (H1 2023: £223m).

Solvency II New Business Value increased 48% to £176m (H1 2023: £119m) with growth in Retail annuities, US and UK protection. We continue to operate with a focus on disciplined pricing and on maintaining strong distribution channels.

Succeeding in a competitive landscape in H1 2024

Workplace DC net flows were £3.2bn (H1 2023: £3.0bn), as a result of continued client wins and increased member contributions.  Workplace pension platform members increased to 5.3 million in H1 2024.

Retail annuity sales were £1,174m (H1 2023: £575m), doubling volumes in a buoyant market in which we also increased market share to 24.3%[9].  Both Lifetime Annuity and Fixed Term Annuity sales performed well throughout H1 as higher interest rates have made these products more attractive to our customers.

Lifetime mortgage advances, including Retirement Interest Only mortgages, were £140m (H1 2023: £163m) reflecting a decline in demand as a result of higher interest rates. We continue to maintain pricing and underwriting discipline. 

UK Retail protection gross premium income increased to £760m (H1 2023: £752m), with new business annual premiums of £75m (H1 2023: £76m) in what remained a highly competitive market.  L&G is the leader in this market with a share of 18.8%[10], delivering a point-of-sale underwriting decision for more than 80% of our customers.  

UK Group protection gross premium income increased 18% to £349m (H1 2023: £295m) as a result of good retention and new business annual premiums of £68m (H1 2023: £53m).  Our online "quote and apply" platform for smaller schemes continues to perform well, processing c492 new clients over the year (H1 2023: c261), and we continue to see growth in this part of the market. Group Protection saw 1,359 income protection scheme members return to work during H1.

US protection (LGIA) new business annual premiums increased 18% to $103m (H1 2023: $87m), with robust Solvency II new business margins of 12.1 % (H1 2023: 11.2%).  Gross premiums increased 6% to $831m (H1 2023: $781m).  Our digital new business platform is making it easier for customers and their advisors to apply and buy our term products, resulting in our strongest ever 6 month sales volumes in H1 2024.  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 Q1 2024.[11]  We expect to drive further sales growth and to reduce unit costs over the coming years.  c98% of eligible new business is now submitted through our digital new business platform.

Corporate Investments Unit

FINANCIAL HIGHLIGHTS £m	H1 2024	H1 2023
Operating profit	71	80
Investment and other variances	(187)	(235)
Profit before tax attributable to equity holders	(116)	(155)
Asset portfolio (£bn)
CALA	1.1	1.1
Legacy Real Estate	0.5	0.5
Legacy Land	0.2	0.2
Fintech and Other	0.2	0.3
Total Corporate Investments Unit NAV	2.0	2.1

Total operating profit of £71m

Operating profit from our Corporate Investments Unit is down 11% at £71m versus prior year earnings (H1 2023: £80m). This largely reflects the trading performance of CALA (H1 2024: £42m) which was lower year-on-year but in line with the second half run-rate (H2 2023 £39m), reflecting a combination of the higher interest rate environment and some planning delays.

Profit before tax predominantly reflects the valuation write-down of Salary Finance as we consider options to manage the business outcome in the best interests of customers and shareholders.

Asset valuations

The valuation of Corporate Investments Unit assets in the Group balance sheet reflects the accounting treatment of the underlying assets, being either on a cost (primarily purchase price) or fair value basis. For CALA, the largest asset in the Corporate Investments Unit, the majority of the value on the group balance sheet is associated with land and work in progress and is therefore valued on a cost rather than fair value basis. CALA's NAV at 30 June 2024 was £1.1bn.

All assets within the Corporate Investments Unit that are held at fair value have been revalued as at 30 June 2024, and other assets have been assessed for impairment. We conduct a thorough internal valuation process and engage external third-party valuers to support all material valuations.

Borrowings

The Group's outstanding core borrowings totalled £4.3bn at 30 June 2024 (H1 2023: £4.3bn).  There is also a further £1.9bn (H1 2023: £1.3bn) of operational borrowings including £1.6bn (H1 2023: £1.1bn) of non-recourse borrowings. 

Group debt costs of £107m (H1 2023: £106m) reflect an average cost of debt of 4.8% per annum (H1 2023: 4.7% per annum) on an average nominal value of debt balances of £4.5bn (H1 2023: £4.5bn).

Cash

As at 30 June 2024, the Group held £2,326m of Treasury Assets and Other Shareholder Cash (H1 2023: £2,275m).

Taxation

Equity holders' Effective Tax Rate (%)						H1 2024		H1 2023
Equity holders' total Effective Tax Rate						30.4		6.0
Annualised rate of UK corporation tax						25.0		23.5

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.  HY 24 is the first period in which a rate of 15% applies to our profits arising in Bermuda.

Solvency II

As at 30 June 2024, the Group had an estimated Solvency II surplus of £8.8bn over its Solvency Capital Requirement, corresponding to a Solvency II coverage ratio of 223%. 

Capital (£m)	H1 2024	2023
Own Funds	16,012	16,556
Solvency Capital Requirement (SCR)	(7,173)	(7,389)
Solvency II surplus	8,839	9,167
SCR coverage ratio (%)	223	224

Analysis of movement from 1 January to 30 June 20241 (£m)		Solvency II Own Funds		Solvency II SCR			Solvency II Surplus
Operational surplus generation		899		(2)			897
New business strain		56		(222)			(166)
Net surplus generation		955		(224)			731
Operating variances							30
Mergers, acquisitions and disposals							-
Market movements							(14)
Subordinated debt							-
Dividends paid							(874)
Share buyback2							(201)
Total surplus movement (after dividends paid in the period)		(544)		216			(328)

1.             Please see disclosure note 6.01 for further detail.

2.             On 13 June 2024, Legal & General Group Plc entered into an irrevocable agreement to acquire £200m of ordinary shares for cancellation. Accordingly, SII surplus has reduced by £201m (inclusive of stamp duty tax). This is aligned to IFRS as detailed in disclosure note 3.04.

Operational surplus generation is at £897m (H1 2023: £947m), after allowing for amortisation of the opening Transitional Measures on Technical Provisions (TMTP) and release of Risk Margin. 

New business strain was £(166)m, primarily reflecting lower UK PRT volumes written at capital strain levels in line with our long-term average. This resulted in net surplus generation of £731m (H1 2023: £752m).

Operating variances include the impact of experience variances, changes to assumptions and management actions. 

Market movements of £(14)m reflect the impact of movements in interest rates, credit spreads and property & equity markets.

The movements shown above incorporate the impact of recalculating the TMTP as at 30 June 2024.

Sensitivity analysis³

	Impact on net of tax Solvency II capital surplus H1 2024 £bn		Impact on net of tax Solvency II coverage ratio H1 2024 %
100bps increase in risk-free rates		0.1	13
100bps decrease in risk-free rates		(0.2)	(14)
Credit spreads widen by 100bps assuming an escalating addition to ratings		0.5	15
Credit spreads narrow by 100bps assuming an escalating deduction from ratings		(0.6)	(17)
Credit spreads widen by 100bps assuming a flat addition to ratings		0.5	16
Credit spreads of sub-investment grade assets widen by 100bps assuming a level addition to ratings		(0.2)	(7)
Credit migration		(0.5)	(8)
25% fall in equity markets		(0.4)	(3)
15% fall in property markets		(0.8)	(8)
50bps increase in future inflation expectations		(0.0)	(2)

3. Please see disclosure 6.01 (v) for further details.

The above sensitivity analysis does not reflect all management actions which could be taken to reduce the impacts. 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. Allowance is made for the recalculation of the Loss Absorbing Capacity of Deferred Tax for all stresses, assuming full capacity remains available post stress.

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.

Solvency II new business contribution

Management estimates of the present value of new business (PVNBP) and the margin as at 30 June 2024 are shown below¹:

£m		PVNBP		Contribution from new business		Margin %
Institutional Retirement - UK annuity business		1,126		69		6.1
Retail Retirement - UK annuity business		1,174		70		6.0
UK Protection		719		26		3.5
US Protection		656		80		12.1

The key economic assumptions as at 30 June 2024 are as follows:

			%
Margin for risk			3.9
Risk-free rate
- UK			3.9
- US			4.4
Risk discount rate (net of tax)
- UK			7.8
- US			8.3
Long-term rate of return on non-profit annuities			5.5

1. Please see disclosure 6.02 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 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 2024 equates to a level rate deduction from the expected returns of 16 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 management	Outlook
Investment market performance and conditions in the broader economy may adversely impact earnings, profitability, liquidity, 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. 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. Rises in risk free rates can lead to reduced liquidity buffers. Falls in investment values can reduce our investment management fee income.	We cannot completely eliminate the downside impacts on our earnings, profitability, liquidity, 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 exposures on a financial reporting basis. We maintain a range of actions to retain liquidity flexibility. Our Own Risk Solvency Assessment ("ORSA") process 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 external shocks to knock economies and markets off course. Our businesses are primarily exposed to economic conditions in the UK and US. Interest rates have started to fall in the UK and look poised to fall soon in the US, but the pace and timing of any further reductions is not clear and there is no guarantee of a "soft-landing" for either economy. 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. During 2024 we have seen signs of commercial property markets stabilising, albeit transaction volumes remain low and the office sector continues to show pressure. Within our construction businesses supply chain pressure and cost inflation appear to be moderating, albeit we remain vigilant over cost inflation being absorbed by the supply chain for projects undertaken since 2021. Labour shortages also 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 and 2024, 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 (98%+) investment grade, and our office property lending continues to focus on high-grade assets let to investment grade or government tenants.
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 could 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 floods 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 that our scale brings a responsibility to act decisively in positioning our balance sheet in the context of the threats from climate change. We continue to embed the assessment of climate risks in our investment process, including in the management of real assets. We measure the carbon intensity 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 objective. This includes near term science-based targets to support our long-term emission reduction goals in line with our transition plan. We continue to develop how we incorporate the potential physical impacts of climate change on both assets and liabilities into our modelling and projections work. We are evolving our approach to the inclusion of nature and biodiversity alongside our climate risk work. Alongside managing 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. Recent events, particularly the increasing frequency of record-breaking heat and extreme weather, have demonstrated the impacts of increased climate volatility can be significant and may emerge rapidly. A failure by governments to ensure an orderly transition to low carbon economies increases the risk for sudden late policy action and large, unanticipated shifts in the asset values of impacted industries. Whilst our transition plans seek to minimise our overall exposure to this risk, their execution 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, to a significant extent, impact on our ability to deliver upon the climate-related targets we have set ourselves, and as the science of climate change evolves, we may need to adapt our actions. Anti ESG sentiment, particularly within countries with a high dependency on fossil fuel related industries, may also constrain global ambition in addressing climate change as well as limiting investment opportunities. Although a broad set of actions to limit global warming are underway, we are moving to a situation where the path to achieving a sub-1.5 temperature increase is becoming narrower. Whilst we retain our current ambition, this could also have an impact on our ability to meet the climate-related targets we have set ourselves. As the science of climate change and the world's responses to these risks evolve, we may need to adapt our actions. Understanding the range of current and potential future policies and progression, as well as their implications for the financial system will continue to shape our transitional approach. We expect a continuing and increased focus on nature and biodiversity risks going forward.
Changes in experience, regulation or legislation may require revisions to our reserves and capital requirements, and could also impact our reported solvency position and our dividend and capital return 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 our dividend and capital return 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 impact 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 and tax 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 deliver regulatory change effectively and efficiently, minimising disruption to our operations.	At times, we have seen elevated levels of mortality in both the UK and the US since the Covid 19 pandemic, and there is continued uncertainty in the outlook. 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.  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 significant advances in medical science leading to more effective treatments, beyond that anticipated, requiring adjustment to our longevity assumptions. Whilst at present we do not believe climate change to be material driver for mortality and longevity risk in the medium term, we continue to keep this under review. Changes in capital standards, both in the UK and elsewhere, could impact our reported solvency position and our dividend and capital return 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 now published and underway. The PRA has also published a policy statement on the use of Funded Re, which is of relevance to us. We are actively engaging with the PRA on all these subjects, and working to implement the required changes. The Bermuda Monetary Authority ("BMA") revised its capital regime for life insurers during 2023, with changes effective from March 2024. The impact of the 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 by the end of 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. New UK rules implementing both a global minimum tax regime and a UK domestic minimum tax regime at 15% apply from 1 January 2024 to all of the Group's businesses globally with work underway to ensure compliance and to engage with regulators as implementation and guidance on the new regimes develops. Bermuda has introduced a corporate income tax regime from 1 January 2025 and there is ongoing consultation on the implementation of the new regime.
Failure to effectively implement regulatory or legislative change applying to the financial services sector 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 including potentially significant monetary penalties.	We identify, track and review the impact of regulatory and legislative 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, and our work on legacy products is also now complete. 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 the government and regulator level for the benefit of our customers and other stakeholders. We have advocated for the development of the Consumer Duty, pension and pension tax reforms, reform to planning in the UK, policies on sustainability and those relating to 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 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 were expected, but most of this work has now been paused and timing is uncertain 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.  Initial registration requirements for the new Buildings Safety Act were met and we are working to ensure we meet the Act's requirements. Strategic risk: We are engaging closely with the new UK Government on issues relating to pensions reform, planning reform and tax policy.
New entrants and/or new 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 and/or Solvency UK. 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 life sciences and health care systems effectiveness.	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 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 brings 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 have been e 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 DB '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, for instance with funding of around 90%.   The pension dashboards initiative will also be a positive development.  A new regulated activity was legislated for in 2024 to operate a qualifying pensions dashboard service.  The FCA recently consulted on the regulatory framework and the final rules are expected to be published in Q4 2024. We recently announced our intention to provide this service and intend to apply to the FCA for a Variation of Permission as soon as we are able to. On the 'collective' defined contribution reform, while we have seen limited demand for this to date, it may hold the potential to disrupt both the workplace and retirement income market.
A material failure in our business processes or IT security may result in unanticipated financial loss or reputational damage. We have constructed our framework of internal control 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 change, IT, security, 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 important business processes are resilient. We also remain cognisant of the risks as we implement a new global operating model and IT platform for Asset Management and have structured the migration in phases to minimise change risks.
The successful delivery of our strategy 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 technology 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 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.

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 8 August 2024.

Financial Calendar	Date
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

Definitions

Definitions are included in the Glossary on pages 87 to 92 of this release. 

Forward-looking statements

This release 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.

The information, statements and opinions contained in this release 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.

Caution about climate information

This release 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 release are likely to be amended, updated, recalculated or restated in future announcements, releases and/or reports. This statement should be read together with the Cautionary statement contained in the Group's 2023 Climate and nature report.

Going concern statement

A going concern statement is included on disclosure note 4.012 on page 42 of this release.

Directors' responsibility statement

We confirm to the best of our knowledge that:

·      The Group consolidated financial statements have been prepared in accordance with the UK-adopted IAS 34 Interim Financial Reporting.

·      The interim management report includes a fair review of information required by DTR 4.2.7R, namely an indication of important events that have occurred during the first six months of the financial year and their impact on the consolidated interim financial statements, as well as a description of the principal risks and uncertainties faced by the company and undertakings included in the consolidation taken as a whole for the remaining six months of the financial year;

·      The interim management report includes, as required by DTR 4.2.8R, a fair review of related party transactions that:

o  have taken place in the first six months of the financial year and that have materially affected the financial position or the performance of the company during that period; and

o  any changes in the related party transactions described in the last Annual Report and Accounts that could have a material effect on the financial position or performance of the company in the first six months of the current financial year; and

·      A list of current directors of Legal & General Group Plc is maintained on the Legal & General Group Plc website:

https://group.legalandgeneral.com/en/about-us/our-management/group-board

By order of the Board

António Pedro dos Santos Simões Group Chief Executive Officer 6 August 2024

Stuart Jeffrey Davies Group Chief Financial Officer 6 August 2024

Enquiries

Investors

Edward Houghton, Group Strategy & Investor Relations Director

[e-mail]

[phone]

Gregory Franck, Investor Relations Director

[e-mail]

[phone]

Media

Natalie Whitty, Group Corporate Affairs Director

[e-mail]

[phone]

Lauren Kemp, Group Head of Corporate Media & Issues

[e-mail]

[phone]

Lucy Legh / Nigel Prideaux, Headland Consultancy

[e-mail]

[phone]

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[1] 10 year gilts

[2] See glossary for more information.

[3] Annualised Net New Revenue, for definition see glossary on page 87

[4] Includes £25bn Pemberton fee-earning AUM at 100% (not pro-rated by 40% ownership stake)

[5] See press release Legal & General agrees £900 million buy-in with the ICI Pension Fund | Legal & General (legalandgeneral.com)

[6] See press release Legal & General completes £1.1 billion buy-in with the SCA UK Pension Plan (legalandgeneral.com)

[7] Pridham Q1 2024

[8] Ranked seventh by AUM, Japanese industry publication (Pension News) March 2024

[9] ABI Q1 2024 Report - Lifetime Annuities only.

[10] ABI Q1 2024 Report.

[11] LIMRA Q1 2024 Ranking.

 

END