Our strategy and our progress.

Our strategy and our progress.
How our response to the five big themes helps us achieve our ambition.
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Strategy
Examples of progress

(For further detail on the points noted below, see Focus. Action. Results. section)

Retirement solutions

We’ve over one million people in our UK workplace pension schemes, having auto-enrolled over 550,000 employees

We’re one of the largest liability driven investments LDI managers, with global AUM of £70 billion

Protection

We’re a market leader in UK protection, with a 21% market share, outperforming our competitors in sales revenue, technology and product innovation

In the US we now have an 6.4% market share in the term life market, reaching the milestone of having one million customers

Direct investment

We established a new team to deliver direct investments in infrastructure and are one of a group of six insurers who plan to invest £25 billion into infrastructure over the next five years

We made a total of £2.9 billion investments in a range of sectors, including housing, care homes, hospitals and city regeneration

LGIM International

Our assets under management in the US grew from $12 billion to $38 billion since 2007

We were granted a regulatory licence to operate in China, having already opened an office in Hong Kong

Digital solutions

Our purchase of Cofunds in March 2013 gave us full ownership of the UK’s largest digital investment platform, with customer assets of £64 billion

We’re the fastest growing home insurer in the direct market

Growing the Dividend

Our Solvency I IGD capital surplus was £4.0 billion at the end of 2013 (2012: £4.1 billion). This equated to a capital coverage ratio of 222% (2012: 234%), within our preferred longer term range of 175% to 225%.

During the second half of 2013 there was encouraging progress on the development of the proposed Solvency II regulatory regime. We now believe that the worst case scenarios have been avoided to the benefit of customers and the wider economy. While full clarity on Solvency II capital will not emerge for at least another 18 months, we currently anticipate that our Solvency II capital surplus will be no lower than our Solvency I IGD capital surplus.

We continue to see profitable growth opportunities, both organic and via selective acquisitions, in which to deploy some of our capital. We also expect to increase the proportion of net cash we return to our shareholders as dividends while maintaining a strong but efficient balance sheet. More specifically, assuming we continue to anticipate a Solvency II surplus being no lower than Solvency I, we expect over the next two years to reduce our net cash coverage of dividend towards 1.5 times. We will provide dividend guidance for subsequent years when Solvency II clarity has emerged. The Board remains committed to a progressive dividend policy over the long term.

Our social purpose underpins everything we do

ACTIONS

  • Helping people to protect against unforeseen circumstances, saving for retirement or investing money wisely
  • Reducing the likelihood of people having to fall back on the State as a result of a loss of income, homelessness or poverty in retirement, thereby reducing the pressure on strained public finances
  • Being an economically useful company that is fundamental to the UK economy in many ways: as an employer, a taxpayer, an investor in infrastructure and a responsible provider of long-term capital to UK companies
  • Campaigning to improve the supply and quality of housing, raising the health of the nation, helping to diminish pensioner poverty and ensuring that major companies are run according to agreed standards of governance and ethics
  • Benefiting wider society through our community and charity work

PROGRESS

  • In 2013 we paid £604 million in death claims, £16 million in critical illness claims and over £132 million in home insurance claims. We helped 550,000 new customers towards a more comfortable retirement by welcoming them into our workplace pension schemes, since auto-enrolment started in October 2012.
  • We invested £2.9 billion in direct investments, including £173 million in housing and care homes and £33.5 million in student accommodation.
  • We paid £877 million worldwide in all forms of tax.
  • We met with the boards of 278 companies to discuss corporate governance issues
  • Our employees contributed 2,247 volunteering days to community and charity work, delivering £4 million in community investment programmes.
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Assessing progress against our ambition

We assess progress against our ambition through the measurement of our key performance indicators (KPIs), a number of which are used in deciding executive remuneration ( Key measure in the remuneration of executives ).

Our financial review section addresses the following KPIs in detail:

Reward our shareholders with superior financial returns

KPIs: Earnings per share Key performance indicator (KPI), Full year dividend Key performance indicator (KPI), Total shareholder return Key measure in the remuneration of executives Key performance indicator (KPI)

Growing net cash, earnings and returns on equity

KPIs: Net cash generation Key measure in the remuneration of executives Key performance indicator (KPI), Operating profit Key measure in the remuneration of executives Key performance indicator (KPI), IFRS profit before tax Key measure in the remuneration of executives Key performance indicator (KPI), Return on equity Key measure in the remuneration of executives Key performance indicator (KPI)

Managing capital prudently

KPI: IGD surplus and coverage

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