How Does Legal & General Group Company Work?

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Unveiling the Inner Workings of Legal & General?

Legal & General Group Plc, a titan in the financial services world, has been shaping financial futures since 1836. As one of the world's largest asset managers, Legal & General Group SWOT Analysis offers a deep dive into its strategic positioning. With a global footprint and a diverse range of offerings, understanding L&G's operations is key for anyone navigating the complexities of the financial landscape.

This exploration will dissect the Legal & General business model, examining how this Insurance Company and Investment Management powerhouse generates revenue and adapts to market dynamics. From its strong 2024 financial performance to its strategic realignments, we'll uncover the drivers behind Legal & General Company's success. Whether you're interested in Legal & General financial performance or the Legal & General investment strategy, this analysis provides valuable insights into this Financial Services leader.

The Legal & General Group operates through three core business divisions, each designed to deliver specific financial products and services. These divisions work synergistically, creating a comprehensive financial services ecosystem. This structure allows the company to offer a wide range of solutions, from institutional retirement plans to retail investment products, all supported by its robust asset management capabilities.

The company's value proposition centers on its ability to manage significant financial assets and liabilities effectively. This includes providing retirement solutions, investment management services, and insurance products. By focusing on long-term investments and responsible investing, the company aims to generate both financial returns and positive societal impacts.

Institutional Retirement

This division focuses on pension risk transfer (PRT) business. It takes on the responsibility of paying pensions from company defined benefit (DB) schemes. In 2024, the company wrote £10.7 billion of global PRT new business.

Asset Management

The Asset Management division manages a total of £1.1 trillion in assets under management (AUM) as of year-end 2024. It provides investment solutions in both public and private markets. The company aims for £85 billion in Private Markets AUM by 2028.

Retail

The Retail division provides retirement and protection solutions to individual customers. This includes retail annuities, drawdown products, workplace savings, and lifetime mortgage loans. Retail saw record volumes in Retail Annuities of £2.1 billion in 2024.

Synergistic Business Model

The Asset Management division supports the Institutional Retirement and Retail businesses by managing invested capital. This model allows for strong margins and efficient capital deployment. The company emphasizes responsible investing and long-term assets.

Key Operational Highlights

The company's operational success is underpinned by its ability to manage large-scale financial assets and liabilities, its expertise in actuarial science, and its global distribution networks. The synergies between its divisions are a key factor in its success.

• £10.7 billion of global PRT new business written in 2024.
• £1.1 trillion in assets under management (AUM) as of year-end 2024.
• 7% increase in Institutional Retirement operating profit to £1,105 million in 2024.
• Record volumes in Retail Annuities of £2.1 billion in 2024.

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Legal & General Group (L&G Group) generates revenue through its core business divisions: Institutional Retirement, Asset Management, and Retail. Its monetization strategies involve fees, premiums, and investment returns across these segments. The company's financial performance showcases its diverse revenue streams and effective strategies.

For the year ended December 31, 2024, L&G reported a core operating profit of £1,616 million, a 6% increase from £1,531 million in 2023. This growth reflects the company's robust financial health and successful execution of its business strategies. The following sections detail the revenue streams and monetization strategies within each division.

Understanding how Legal & General operates provides insight into its financial success, as detailed in this analysis of its financial performance.

Institutional Retirement

The Institutional Retirement division is a major revenue driver for L&G Group. Its operating profit increased by 7% to £1,105 million in 2024. This growth is supported by the increasing scale of back-book earnings and consistent investment performance within its annuity portfolio. The division's revenue is primarily generated through Pension Risk Transfer (PRT) deals.

• In 2024, the division wrote £10.7 billion of global PRT.
• The division's success is underpinned by its ability to manage and grow its annuity portfolio effectively.
• The focus on PRT deals highlights a key monetization strategy within this segment.

Asset Management

The Asset Management division reported an operating profit of £401 million in 2024, slightly down from £448 million in 2023. This reflects investments made to drive future growth. Despite the slight decrease in operating profit, the asset management arm saw a 4% surge in revenues, jumping from £926 million in 2023 to £967 million in 2024, reflecting a conscious shift towards higher margin business. The company monetizes through fees on its substantial £1.1 trillion in assets under management (AUM).

• Fee-related earnings decreased to £256 million in 2024 from £268 million in 2023.
• The average fee rate increased from 7 basis points to 8 basis points.
• The division's focus is on growing AUM and increasing fee rates.

Retail

The Retail division contributed £504 million in operating profit in 2024, up from £449 million in 2023. Revenue is generated from retail retirement and protection solutions, including annuities, drawdown products, and workplace savings. Record volumes in Retail Annuities of £2.1 billion in 2024 indicate a strong revenue stream from this product line.

• The division benefits from strong sales in retirement and protection products.
• Retail Annuities are a significant contributor to revenue.
• The focus is on providing diverse retirement and protection solutions.

Corporate Investments and Shareholder Returns

L&G also has a Corporate Investments unit, which manages a portfolio of non-strategic assets. This unit delivered an operating profit of £95 million in 2024, down from £136 million in 2023. The company's overall strategy also involves returning capital to shareholders.

• A £500 million buyback was announced for 2025.
• The company intends to return over £5 billion through dividends and buybacks over the next three years (2025-2027).
• This demonstrates a commitment to shareholder value alongside operational revenue generation.

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In 2024, Legal & General (L&G Group) implemented significant strategic shifts, marked by key milestones that have reshaped its operational and financial landscape. The company focused on streamlining its structure, particularly through the reorganization announced at the Capital Markets Event on June 12, 2024. This involved consolidating its operations into three core divisions: Institutional Retirement, Asset Management, and Retail, setting the stage for focused growth and enhanced efficiency within the Legal & General Company.

Strategic moves, including major disposals, have been pivotal in unlocking value and reinvesting for future expansion. The sale of Cala, a housing developer, for £1.35 billion and the US protection business for £1.8 billion, exemplify this approach. The partnership with Meiji Yasuda, involving the US protection business and the US pension risk transfer (PRT) business, is expected to boost growth in the US PRT market and bring in co-investment capital.

Operationally, Legal & General demonstrated robust performance in 2024, with core operating profit increasing by 6% to £1,616 million. This growth was driven by strong results in Institutional Retirement and Asset Management, reflecting the company's ability to adapt and capitalize on market opportunities. The company's focus on higher-margin products and its commitment to responsible investing further solidified its position in the financial services sector.

Key Milestones

The Capital Markets Event on June 12, 2024, unveiled a reorganized structure with a focus on Institutional Retirement, Asset Management, and Retail. Major disposals, such as the sale of Cala and the US protection business, were completed. A strategic partnership with Meiji Yasuda was established, enhancing growth potential in the US PRT market.

Strategic Moves

The consolidation of LGIM and LGC into a single Asset Management division aimed to create a unified, global asset manager. Investment in Taurus Investment Holdings accelerated progress in US real estate. The focus on higher-margin products and technology for customer engagement further enhanced the company's strategic direction.

Competitive Edge

L&G Group's significant scale, with £1.1 trillion in AUM, and its long history, provide a strong foundation. The synergistic business model, with asset management managing PRT deals, allows for strong margins. The company's commitment to responsible investing and its focus on long-term, socially useful investments contribute to its brand strength.

Financial Performance

Core operating profit increased by 6% to £1,616 million. Institutional Retirement's operating profit rose by 7% to £1,105 million. The Asset Management division saw revenues increase by 4% to £967 million. The private markets platform reached £57 billion AUM in 2024, with a target of £85 billion by 2028.

Detailed Analysis

In 2024, Legal & General demonstrated resilience and strategic foresight. The company's ability to adapt to market dynamics and capitalize on opportunities is evident in its financial performance and strategic initiatives. The company's focus on responsible investing and long-term value creation continues to differentiate it in the financial services industry. For a deeper dive into the Legal & General's marketing strategies, consider exploring the Marketing Strategy of Legal & General Group.

• Institutional Retirement wrote £10.7 billion of global PRT volumes.
• The Asset Management division increased its average fee rate from 7bps to 8bps.
• L&G's strategic investment in Taurus Investment Holdings included an initial commitment of up to $200 million.
• Meiji Yasuda will bring in co-investment capital of ¥150 billion (approximately $1 billion as of March 5, 2025) into Asset Management.

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Legal & General (L&G) holds a strong position in the financial services industry, recognized as a leading UK financial services group and a major global investor. The company's global footprint extends across the US, Europe, and Asia, particularly in investment management. Its long history and consistent mission of protecting financial futures foster customer loyalty. L&G is a significant international player in pension risk transfer (PRT), UK and US life insurance, and UK workplace pensions and retirement income.

Despite its strengths, L&G faces risks such as regulatory changes, competition, and technological disruption. Changes in consumer preferences, especially concerning retirement savings and investment products, also pose challenges. Furthermore, investment returns falling short of expectations and changes in liability discount rates can impact profitability. Restructuring a large business like L&G also carries execution risk, potentially disrupting client experience and benefiting competitors.

Industry Position

L&G is one of the world's largest asset managers, with its Asset Management arm (LGIM) being the 10th largest investment management firm globally by AUM. It is the second-largest institutional investment management firm in Europe. The company has a strong presence in PRT, life insurance, and workplace pensions.

Risks

Key risks include regulatory changes, competition, and technological disruption. Changes in consumer preferences and investment returns falling short of expectations also pose challenges. Restructuring and execution risks are further potential issues.

Future Outlook

L&G is focused on sustainable growth, sharper focus, and enhanced returns. The company intends to grow its Institutional Retirement business and strengthen its Retail propositions. L&G plans to return over £5 billion to shareholders over 2025-2027.

Strategic Initiatives

Strategic initiatives include maximizing the value of non-strategic assets through a new Corporate Investments unit and a disciplined capital allocation approach. L&G is targeting 6-9% compound annual growth in core operating EPS between 2024 and 2027. Innovation roadmaps include accelerating the growth of its private markets platform, targeting £85 billion in AUM by 2028.

Financial Performance and Projections

L&G anticipates strong volumes in Institutional Retirement in 2025, with a busy PRT pipeline and active pricing on £17 billion of new deals, with visibility on a further £27 billion. The company expects continued positive flows into higher-margin products in Asset Management and growth in the retail annuities market. For more details, you can read about the Growth Strategy of Legal & General Group.

• Targeting 6-9% compound annual growth in core operating EPS between 2024 and 2027.
• Planning to return over £5 billion to shareholders over 2025-2027 through dividends and buybacks.
• Anticipating strong volumes in Institutional Retirement, with a busy PRT pipeline.

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