Group chief executive’s Q&A
Group chief executive Nigel Wilson joined Legal & General at the height of the financial crisis in 2009, taking over the group chief executive role in 2012. Under his stewardship, the company has achieved consistent growth in assets and earnings.
QNigel, what kind of performance has Legal & General delivered to your shareholders since 2009?
AI’m really excited and proud about what we’ve achieved. We’ve built market leading positions in life protection, workplace savings, digital fund platforms, bulk annuities and pension fund management. We’ve consistently grown cash, giving our shareholders a 300% return over this time, making us the top performer from all major life insurers across the globe. In the last five years we’ve nearly trebled our dividend payments, with 2014’s full year dividend 21% higher than 2013.
QYou must be pleased that the UK’s economy is picking up. But are there any economic reforms that still need to happen?
AThere’s now been seven successive quarters of GDP growth. But the global economy is still fragile and we need to be ready for new shocks. We’re still recovering from the financial crisis. Real incomes are around 10% lower than in 2008. The annual deficit between state spending and tax revenue is just below £100 billion. We need to cut the deficit and invest in real jobs that pay real wages. I admire William Beveridge for his 1946 welfare reforms. But we need a renewed framework, sharing the costs between the state and the insurance industry to deliver affordable solutions for as many people as possible.
QThere’s been a lot in the media about you putting money into rebuilding Britain. Why are you doing this?
AWe need to invest our shareholder and customer funds for long periods of time, getting a return on our ‘slow money’ over 30, 40 or even 50 years. Investing in Britain’s infrastructure can give us long-term growth and make us economically and socially useful to society. We intend to put £15 billion into direct investments, including UK infrastructure and housing, with £5.7 billion already invested. We aim to be a catalyst for other investors.
QYou said last year that pensions auto-enrolment was a great success. Is the pensions crisis finally over?
AWe’ve made a really good start. We now have 1.2 million people in workplace pension schemes and over £11 billion in assets under administration. But contribution levels need to rise and there is a strong case for reforming the current system of pensions tax relief, as over two thirds of relief goes to the wealthy.
QCan your investment management business adapt with the move away from defined benefit (DB) pensions and do you need to diversify?
AWe’re already developing a strategy to respond to global macro trends. The move away from DB pensions is inevitable. Our investment management business is seeing outflows from DB schemes. So we’re expanding internationally, having around 450% growth in overseas assets since 2009. We help companies with DB pension schemes de-risk their investments by more closely matching assets and liabilities. Ultimately we can also take over responsibility for paying pensions through our bulk annuity plans.
QHow have you coped with the unexpected changes which the Chancellor made to the way people can take retirement income?
AWe needed to be resilient and seek ways to replace the loss in revenue from individual annuities. Bulk annuities now comprise over 90% of all annuity sales and annuity sales increased by 61% in 2014. Our £3 billion transaction with ICI was the UK’s largest ever bulk deal. We’re also well placed to help people with personal pensions invest their pension pots.
QWhat worries do you have about the future?
AThere are some signs that the global economy is picking up. But at the same time significant risks still exist, with considerable worries over the fragility of the Eurozone. Markets don’t like uncertainty. Future elections in the UK, Europe and the US could all make the unstable background worse. However, our business model has proved to be resilient in the past. The changing political background could create further regulatory issues for us, so we need to work closely with future governments.
QWe hear a lot about the digital revolution. Are your customers benefiting?
AWe want to help our 10 million protection, savings and investments customers manage their accounts digitally. For example: we already own the UK’s biggest digital investment platform with around £72 billion of assets; our retail protection business, with over £1bn of premiums in 2014, now benefits from over 80% ‘straight through processing’; our increasingly digital general insurance direct sales grew by 29% and we have introduced a new online digital workplace pensions proposition for SMEs. John Pollock, CEO of LGAS, who is retiring at the AGM after 35 years, has been a keen and effective driver of our digital programme. I’d like to thank him for these and all his other contributions as he passes the digital baton to the next generation of senior managers.
We’re building a business that is growing organically based upon a simple strategy that taps into five key macro trends. We engage our employees by placing customers at the heart of our business. My role is to provide energy and direction and create a powerful leadership team.”