CHAIRMAN'S STATEMENT.

John Stewart, Chairman (photo)

“Legal & General’s clear strategy, and its strong ability to execute that strategy, enabled your Company to deliver another strong set of results for the year.”

JOHN STEWART
CHAIRMAN


GROWING OUR BUSINESS.

A STRONG 2011

While the UK economy essentially flatlined, and the market suffered repeated uncertainties about the eurozone, Legal & General’s sales, [operational cash generation] and operating profits rose across all four of our business divisions: Risk, Savings, Investment management and International.

In the UK, the Company has retained its clear leadership in the protection and annuities segments, as well as in institutional investment management and transformed the savings business to achieve significant successes in workplace pensions and retail savings. At the same time, our international businesses are delivering improved returns and operating much more efficiently.

TSR AND DIVIDEND

FULL YEAR DIVIDEND

6.40p

(2010: 4.75p)

This robust performance marked us out as one of a limited number of success stories in the global insurance sector, generating a [total shareholder return] of 11% for the year.

The Board is recommending a final dividend of 4.74p per share, payable on 23 May 2012. This is an increase of 39% on the prior year, and returns dividend to the pre-credit crisis level of 2008. The full year [dividend is 2.25 times covered] by cash. Given the improved underlying strength of the Company, the Board has every confidence that this is a further positive step in our progressive dividend policy.

RETIREMENT OF CHIEF EXECUTIVE

TOTAL SHAREHOLDER RETURN

11%

(2010: 25%)

In September, Tim Breedon, Group Chief Executive, informed the Board of his intention to retire by the end of 2012, by which time he will have served the Company for 25 years, of which he has spent ten years on the Board and seven as Group Chief Executive. The whole Board would like to thank him for his outstanding contribution to Legal & General, both in his current role and previously as one of the main architects of the growth of LGIM to its current position as the UK’s leading pension fund manager and one of the largest asset management groups in Europe. The long notice he has given us has enabled a process to be put in place to identify his successor and ensure an orderly transition.

BOARD CHANGES

During the year Sir David Walker and James Strachan, respectively Senior Independent Director and independent non-executive director, stood down from the Board, having served for nine and eight years respectively. We would like to thank them for their contributions and wise counsel over many years. During 2011 we appointed three new independent non-executive directors: Mike Fairey, formerly Deputy Chief Executive of Lloyds TSB; Stuart Popham, formerly senior partner of Clifford Chance, and Julia Wilson, who is Group Finance Director of 3i. We look forward to working with them. There have been consequential changes to committee memberships which are outlined in each of the Committees’ reports.

SHAREHOLDER COMMUNICATIONS AND ANNUAL GENERAL MEETING

This year’s AGM will be held at 11.00am on Wednesday 16 May 2012 at The Honourable Artillery Company, City Road, London EC1Y 2BQ.

We continue to encourage shareholders to view information online. Almost 90% of our shareholders no longer receive printed versions of our Annual Report. This has allowed us to improve shareholder communications and add options such as an iPad app which we introduced last year and was well received.

OUR STAFF

I would like to thank all Legal & General’s employees for their contribution during 2011. In every area of the Company that I visit, I am hugely impressed – often amazed – by employees’ enthusiasm and by the pride our people take in providing the best possible service to our customers and the communities in which they operate. This is one of the characteristics which sets Legal & General apart as a customer-focused company.

OUTLOOK

The insurance sector faces a continuing period of low economic growth combined with regulatory uncertainty in our sector, principally as a result of the EU’s [Solvency II] Directive and the upcoming Retail Distribution Review (RDR) in the UK. However, the clear strategy we have outlined for Legal & General, the strength of our balance sheet and the quality of our distribution across a variety of channels, mean we are well positioned for this period of change.

JOHN STEWART
CHAIRMAN

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