Legal & General Group Plc (LGEN) Earnings Call Transcript & Summary

Good morning, and welcome to our 2024 AGM. And it's nice to see so many familiar faces again. This is our third time hosting a hybrid meeting here at the BMA. And we're delighted to welcome those who've joined us both in person here today and virtually. I'd also like to welcome our new Group Chief Executive, Antonio Simoes, to his first AGM with us. As you may be aware, Legal & General is approaching its 188th anniversary this year. And we have been taking a look back through our archived collection and we found a copy of the minutes from the very first Board meeting back in 1936, which some of you may have seen on display at the back of the hall when you enjoying your teas and coffees. Now moving on to the formalities. Following continued positive feedback about this venue, we are once again here at the BMA. As a reminder, an audio induction loop is in place for those individuals wearing a hearing aid, which includes myself. As always, we welcome your feedback, and I invite you to share your views with either myself or any of my colleagues here today, you will have met when you arrived. Before we commence the meeting, there are the usual housekeeping matters to let you know about, starting with the evacuation procedure. In the event of an emergency, the fire alarm will sound. There are no planned fire tests taking place today. So if you hear the alarm, please would you leave via the nearest emergency exit. Please avoid use of the lift and make your way through to the courtyard to the front of the building. Colleagues from L&G and the BMA will be available to assist you if needed. With that introduction, I confirm that we have a quorum present with us today, so I now declare the 2024 AGM formally open. If you've not already done so, please could I ask you to switch off your mobile phones, and I will now hand over to your Chair, Sir John Kingman.

Thank you, Jeffrey, and a very good morning to everyone. Warm welcome to Legal & General's 2024 Annual General Meeting. It's great to see so many of you here in person again. We're now getting used to hosting these events in a hybrid fashion, so a warm welcome also to those who have chosen to join us online. Unlike some major companies, we have no plans to move to a virtual Annual General Meeting. We greatly value the opportunity to engage with our shareholders directly in person. While this AGM is a first opportunity for you to hear from and meet are now not so new Group Chief Executive, I believe today marks Antonio's 100th working day in the business. The format [indiscernible] following my opening remarks, I will hand to Antonio to share his early reflections on Legal & General as well as the highlights of our work in 2023. Then we will hear from my colleague Nilufer von Bismarck, our group Board member with responsibility for climate and our people. She will update on the progress we're making against our climate transition plan and net zero ambition, which was approved by shareholders last year. The time given to sharing this reflects the central importance that Legal & General places on our contribution to addressing climate change as a core part of our purpose and as a driver of our future business performance. This is also reflected in the embedding of environmental targets in our executive share plans as a percentage of their awards. Nilufer will also cover wider ESG matters, including our record diversity and inclusion, which we see as critical to the fabric of our workplace and to our business success. Finally, there will be plenty of time for your questions that you have for the Board. Let me start then by welcoming my group board colleagues with the exception of Antonio that faces should all be familiar from last year. There have, however, been some changes to roles and responsibilities around the Board table with Philip Broadley stepping down as Senior Independent Director to be succeeded by Lesley Knox. In turn; Laura Wade-Gery has now taken up Lesley's place as Chair of our Remuneration Committee. My thanks to everyone for their service in prior and new roles. As was the case for most businesses, 2023 presented Legal & General with plenty of challenges to navigate, as ongoing geopolitical uncertainty, high interest rates and sticky inflation impacted consumer confidence, client behavior and asset valuations. I'm proud to say that in spite of this backdrop, we achieved record new business volumes, driven by successes in pension risk transfer, growth in U.K. annuities and U.S. protection and our in-year profits were resilient. Alongside this, our contractual service margin, that is the store of future profits generated by our insurance businesses grew strongly, while our Solvency II coverage ratio remained strong at 224%. Thanks to this performance and that of previous years, we are poised to achieve the 5-year ambitions we set out back in 2020 across cumulative Solvency II capital generation, cumulative dividends declared and net surplus capital generation over dividends. In that context, we were pleased once again to increase our dividend per share by 5% to 20.34p. Looking beyond financial performance, we were recently awarded Britain's Most Admired Company for 2023, picking up this accolade for the second year running. This is actually a unique achievement for a financial services company, and it is a strong endorsement of the way we work with our peers, our partners and communities as well as the results we achieve. This partnership working was tangibly evidenced in October when our ambitions as an investor and employer aligned as we celebrated the opening of our impressive new facility in Cardiff, which I visited earlier with the Board this year, part of our GBP 1 billion regeneration project in the city, which actually makes us Cardiff's largest private investor. I would like to take this opportunity to thank everyone at Legal & General for their hard work and their commitment to the business and to our clients and customers. But in particular, I do want to record special thanks to Sir Nigel Wilson, who, as you know, stepped down at the end of 2023 after 14 years of extraordinary service to the business. For our part, the Board's most critical task in 2023 and was to appoint a new Group Chief Executive to succeed Nigel. And a few short weeks after I spoke to you at last year's Annual General Meeting, we were delighted to appoint Antonio Simoes after a rigorous selection process from a very strong field. The strength of that field for the role is a testament to the regard in which Legal & General is held. Antonio stood out from the field for his formidable track record in leading and growing complex international businesses as well as his intuitive feel for Legal & General and what we stand for. He is passionate about our potential and also about our values. We are, therefore, delighted to have attracted him back to the U.K. after 3 years leading Banco Santander's European businesses from Madrid. For Antonio, it is a return to London, very much a homecoming having spent much of his working life based here, including as Chief Executive of HSBC U.K. Antonio has made an extraordinary energetic start to his tenure, already meeting 90% of our employee base and getting to know our key partners, clients and investors and critically setting a date to share an update on our future strategy with our investors on the 12th of June. Since January, Antonio and his executive team have been working hard to define the next chapter for Legal in general, with an emphasis on building on our strong purpose and performance track record to deliver growth and continue to deliver long-term shareholder value. I and the Board feel confident and optimistic about our future. We'll be happy to take your questions in a few moments. But first, I'd like to hand over to Antonio to give a bit more detail on the progress we made in 2023 and to share his early impressions of the business with you directly. Thank you.

Thank you, John, and good morning. It's great to be here for my first AGM as the Chief Executive of Legal & General. Today, as you said John, marks my working day 100. So it feels like a good moment to reflect everything that I've seen since January reinforces what attracted me to Legal & General. In particular, there are 3 things: a strong sense of purpose, the quality of our people and our performance track record. So on purpose first, I firmly believe that strategy and culture cannot be separated. And as we approach our 188th anniversary in June, just next month, our purpose remains relevant and authentic. It reflected in the decisions that we take and the work that we do. Second, that purpose is also a source of real pride and motivation for our people. And one of the reasons that, as John mentioned, we've been named Britain's Most Admired Company for 2 years in a row, making us the first organization to achieve this in over a decade. And while the award reference is Britain, Britain's Most Admired Company, the sentiment and the sense of pride for our people is global. Since January, I've had the chance to visit offices that are home to 90% of our people, London, Cardiff, Hove, Barnsley and Solihull here in the U.K., Frederic, Stanford and Chicago in the U.S. and also Bermuda. In each of these locations, the passion our people have for their roles is clear. Our people love being part of Legal & General and the impact that we have in society. which leads me to the final point on performance. We have businesses that are market-leading and they have good synergies between them. We also have a great track record of capital generation and a strong balance sheet as we see in our 2023 results. We produced a resilient set of results in what was challenging markets, which underlines the core strength of our businesses and also the power of the synergies between them. We achieved record new business volumes in pension risk transfer helping pension plans achieve their derisking goals and securing their members' benefits. Many of our transactions were in long-term clients of LGIM, our asset management business. This included securing the benefits of 53,000 members of the Boots pension scheme in a record GBP 4.8 billion transaction, which we did just at the end of the year, and also 67,000 members of the British steel pension scheme. Actually, this was the fourth buy-in that we did with the British Steel scheme, taking our total insured of their scheme liabilities to GBP 7.5 billion. We also continued to make progress in our U.S. PRT business with transaction volumes since our entry into that market back in 2015, now surpassing USD 10 billion. Last year, in the U.S., we also completed our largest ever single transaction. Legal & General Capital, our asset origination business continue to build its portfolio and increasingly attracted third parties to work alongside us to build socially valuable assets. For example, together with Bruntwood and the Greater Manchester Pension Fund, we committed to invest GBP 0.5 billion into science, tech and innovation. And alongside Octopus Energy, we invested a further GBP 70 million in our partner [ Cansa ] to help scale up their ground source heat pump business and reduce carbon emissions. Within LGIM, our work to modernize and internationalize our footprint continued with international assets under management now representing 40% of the total. Assets under management last year fell due to ongoing interest rate increases, although revenues were more resilient than that, reflecting our deliberate and successful shift towards higher-margin propositions. And we also maintained a disciplined approach to cost management whilst continuing to invest for the future. This led to flat costs in 2023 compared to the previous year despite significant inflationary pressure. We also strengthened our position in defined contribution pensions, both as a fund manager and by offering end-to-end service for workplaces. We continued to be a leader in U.K. retail protection with a share of over 18%. Our retail business also saw annuity sales grow by an impressive 48% and in the year as the interest rate environment and the increases in interest rates made actually annuities more appealing for customers. Thank you to the entire L&G team for the work in 2023 to deliver these results. And a special thank you also to Nigel, my predecessor for his 11-year tenure as CEO. So now looking at the future. Like all businesses, we have challenges. We operate in competitive markets and are impacted by the changing macro environment. We need to continue to evolve and to adapt to seize new opportunities and recognize where we can improve. That is, for me, an exciting prospect because we do it from a position of strength. Over the last few months, I and the wider management team have been working intensely to define how we are going to make the most of our position to deliver the next phase of profitable, sustainable growth for L&G. At Capital Markets event in just 3 weeks' time on the 12th of June, you can expect 3 things: first, a clear strategy and a simpler investment case. This will continue to build on our purpose and on the synergies between our businesses. Second, an articulation of how we will deliver growth across institutional retirement, retail, asset management, both public and private markets, both here in the U.K. and internationally. And third, guidance on capital allocation, our distribution policy and the financial measures we will use to track progress. I would like to close by thanking you, as shareholders, for the support you have given to Legal & General. I'm both proud of our history and ambitious for our future. It's an honor to have the opportunity to lead the company's next phase of growth on your behalf. I'd like now to hand over to Nilufer.

Thank you, Antonio, and good morning to all of you. Let me begin by adding my welcome to [ Johns ] to those fellow shareholders in the room and also to those joining electronically. I'm delighted to have the opportunity to speak with you once again. and to update you on 2 of the key areas of focus for me as a director. Those are, as I'm sure by now you are aware, and as John has already mentioned, our people and our climate. Last year at our AGM, I focused on presenting and explaining our transition plan. We were delighted to receive your overwhelming support for it. I will discuss our progress against the plan a little later. I want to start today by talking about our people. As a Board, we recognize that our success depends on the leadership and commitment to [ our ] 11,500 people. We have a duty to them to create a culture where mental and physical well-being matters, where diverse views and experiences are valued and where everyone can succeed with equitable access to opportunity. This includes working hard to ensure we understand our people's experiences, views and aspirations. As Workforce Director, I engage with our employees throughout the year, listening to their concerns, representing our views to the Board and finding ways to address any issues I uncover. It is important to us as a Board that these activities are carried out openly and transparently. So our people have proper insight and visibility. I should add, this is done in partnership with our union unite and our in-house management consultative forum with both of whom we continue to operate collaboratively and pragmatically. I've set out in our 2023 annual report an explanation of the activities and engagements taking undertaken with and for our people throughout the year. I very much hope you found this explanation informative. And I would be happy to take any questions and feedback whether today or at a later date. Diversity and inclusion remains strategically important topics for Legal & General. Building a more diverse workforce and a more inclusive workplace is a potential source of commercial advantage for us. It is also the right thing to do. I've set out on the slide behind me, the goals for our diversity and inclusion strategy and what we have achieved so far. We know that there is more work we need to do particularly as we look to improve diversity at our more senior grades. We remain committed to taking the steps necessary to make ours an even more diverse and inclusive workplace. Turning now to climate, an area our employees care passionately about. I hope you enjoyed reading our 2023 climate and nature report which explains how we are transitioning to a greener future and our progress on this path. The UN Environment Program forecasts that global warming is likely to be above the target agreed in Paris. Such an outcome would be devastating to ecosystems and very disruptive to economies. While the impact of climate change is accelerating, so too is the engagement of governments, companies and individuals in what needs to be done. The COP28 UN Climate Change Conference in Dubai resulted in a consensus to transition away from fossil fuels. Allied with the scale-up of clean energy technologies, it provides hope we can, together, hold off more significant warming. Environmental gains made in areas, including air quality, deforestation, protecting the ozone layer and the adoption of renewable energy all demonstrate that rapid progress is possible. We need to go much faster, but there's plenty of progress to acknowledge. We believe that Legal & General has a duty to help prevent the worst outcomes from climate change. This is a fundamental part of good risk management on behalf of our customers, clients and you, our shareholders. Our climate transition plan sets out how we will both manage the risks and grasp the opportunities that climate change presents through our influence as a shareholder, the investment choices we make and the actions we take within our operations. Our scale and expertise gives us the potential to play a key role in the reallocation of finance towards drivers of the transition to net zero, both through our own assets. And through those, we manage on behalf of our clients. We are continuing to develop our understanding of the group's impacts and dependencies on nature. This is very much linked to climate change, posing some similar risks and opportunities as capital is allocated to nature positive outcomes. Our approach will build on our existing climate strategy. Climate change and nature loss of systemic issues and as we move towards 2030 and beyond, a global response will be critical if the world is to succeed in limiting their impact. Similarly, action by others, including governments, is integral to Legal & General's success in its efforts. Nevertheless, our transition plan rightly commits us as a company to action on each of the 3 pillars of our strategy: invest, influence and operate. Our progress is summarized on the slide behind me. We are pleased with what we have achieved in 2023, and we'll continue to deliver against our commitments. Let me conclude by thanking shareholders once more for giving me the opportunity to carry out 2 such important roles for the company. I'll now hand back to John, but of course, I hope to meet as many of you as possible today after conclusion of the formal proceedings. Thank you.

Thank you, both. I would now like to ask Jeffrey to run through the formal business of the meeting before we move on to questions.

Thank you, Chairman. The Notice of Meeting was published on the company's website and made available to shareholders on the 11th of April. It's also available to view under the document section on the Lumi platform for those of you who have joined us today online. As in previous years and with your permission, I propose to take the notice of meeting as read and confirm that all resolutions will be decided on a poll. Thank you. I now formally propose that each of the resolutions are set out in the notice of meeting and appearing on the screen behind me is put to the meeting as a separate resolution. Further, the resolutions numbered 22 to 26 are put to the meeting as special resolutions. The poll is now open and will remain open throughout the duration of the question-and-answer session. And the poll will close at the end of the meeting. For those of you with us today in person, please could you complete the poll card, which should have been given to you when you registered this morning. You can do this by putting a tick or cross in one of the boxes marked for, against or withheld or by indicating the number of shares you wish to vote on for any of these 3 options. If there's anyone present who is entitled to vote and who does not yet have a poll card, please raise your hand, and one of my colleagues will bring one to you. Finally, please could ensure that you've signed the poll card and place it in the ballot box at the doorway as you leave. For those shareholders attending online, the voting icon will appear on the navigation bar. Once you click on this, the resolutions will appear on your screen along with the for against and withheld voting options. Please simply select one of these options in order to cast your vote. Your vote will have been submitted when the voting option icon changes color, having selected it and a vote received message appears. If any person attending the meeting online is having difficulties with using the platform, there is a user guide available in the documents tab and on Pages 13 and 14 of the Notice of Meeting. As usual, the company's registrars will act as scrutineers. And the final results of the voting will be announced to the London Stock Exchange and posted on the company's website as soon as possible. If you would like a paper copy of the results posted to you, please let one of my colleagues know on your way out. Chairman, I will now hand back to you to open the question-and-answer session.

Thank you, Jeffrey. I'd now very much like to take questions from shareholders. Can I just remind you to ask one question each to allow fellow shareholders the opportunities to ask their questions? If you'd like to ask a question, can you raise your hand and a steward will bring a microphone to you when called, it would be helpful if you could give your name and state whether you are a shareholder, a proxy or a corporate representative. [Operator Instructions] Wonder if I could take the first question, please. Number 4 at the back.

My name is [ John Burk ], and I happen to a former finance journalist. I'd like to ask Sir John, when the title change from Chairman to Chair. Chair is actually a university. And if I remember in my young day, the Chairman were actually called Chairman.

Thank you for asking. It's a good question. My recollection is that we changed the title about a year ago. I wouldn't read anything huge into that. It is more common, modern practice. I don't have strong views on the topic. We felt it was the right thing to do. Clearly, it's a matter of taste. Can I take another question, please? Question two.

[ Nick Schnider ], private shareholder. The question is really about the building and to get a better understanding of our build-to-sell business, inspired villages, affordable homes and the unfortunate closure of modular homes. So I haven't quite understood house building all these buildings linked together with their separate companies, how they enter link and where we actually headed? Is it a growing business or declining or static?

Thank you. It's a really excellent question, and I appreciate the chance to say something about this. Antonio may want to add to what I say. I mean the first thing to say is that I think we -- the Board does feel a regret about that we weren't able to make more of a success of our modular homes business. You may know that we're not the only large sophisticated company to have attempted to make a success in modular homes. It didn't work out. I don't think it was a silly thing to have sought to do. It's a really interesting sector. And I think there is certainly potential there for others to make a success where we didn't succeed. I think in the end, the Board made the right decision to -- that we had given us as good a go as we were going to. And I think we made a responsible decision on behalf of shareholders in relation to that. We own a much larger housebuilder and [ Carla ]. I think we've been an extremely good investor and owner of [ Carla ]. It's done really well through the cycle and continues to continues to flourish. As to how all this fits together and fits with our wider savings business, I think we'll have more to say on that at the Capital Markets Day on the 12th of June when Antonio is essentially going to lay out our ambitions for the future, which I think will be clear and focused. Antonio, is there anything you'd like to add?

So nothing else to add on modular, but as you mentioned, specifically, affordable homes and inspired villages. So we will set out in 3 weeks' time, the strategy going forward. But I've been very impressed by those businesses. We are as an investor, very keen on those asset classes. They have a huge social purpose. And at the same time, we're looking at third-party investors that can invest alongside L&G. So I will say more on the 12th of June, but those are very strategic businesses for us.

Yes, this gentleman here, number one.

Welcome to Mr. Simoes. It's so good to have you on board and wish you all the very best for the job. I've actually got loads of questions, but I'll restrict myself to 3.

Could you restrict yourself to one, please, if you don't mind. If we have time towards the end, we may be able to come back to you, but could you stick to one, if you don't mind.

Okay. So there'll be questions, 1a and 1b then.

All right. I'll settle for that.

First of all, just a comment. For those who are sat down here, insurance company accounts are immensely difficult to comprehend. And so I went to Mr. Davies report, and that's been shortened significantly to a very interesting Q&A section. But really, really, for those of us who were sat down here, we need more detailed explanations as to what's happened and why. And if you could expand your bits in the future, please, Mr. Davies, that'll be enormously appreciated. Coming out of that, does the Solvency II capital ratio fell from 236% to 224% and the surplus held from GBP 9.9 billion to GBP 9.2 billion. And although those are immensely strong surpluses and there's no problem, it'd be interesting to know what was behind that, please? And question 1b then...

I thought that was question 1b. Keep going.

Question 1b. Yes, it's -- your PRT business, obviously, it's an enormous source of growth for you at the moment. And of course, we're in a happy place at the moment because all the U.K. defined benefit pension schemes are largely moving to surplus or moving to a very small deficits. So companies will be happy to actually offload the pensions. But what I'm wondering is what has happened, is interest rates have risen, so therefore, liabilities have fallen on a net present value basis. What I wonder, though, is this an easy time for us to do this kind of -- sort of business because companies will be looking at a much smaller liability number to offload on to us wants to be much harder for us to invest their money to actually cover the costs of the schemes.

Thank you. Let me take the -- I think there's 1b or 1c. And I'm going to ask Jeff to tackle your first 1 or 2 questions. So you're right. This is a really interesting moment for us in the PRT market, both in the U.K. and also in the United States and potentially in some other places as well. As you rightly say, the movements in interest rates have made a lot of big corporate sponsors or pension schemes very open to the possibility of buyout. And that means there's a great deal of potential business coming our way. Now what we need to do in response to that is make the most of the opportunity but critically while maintaining our discipline in terms of the terms on which we take schemes on to ensure that we maintain the very strong balance sheet that we have. And a critical part of that is the strength of our capital resources, as measured by the coverage ratio, which is -- the way we think about that is we need to make sure we have several buffers both in order to be able to write the business we wish to write going ahead to make the most of the opportunity for shareholders but also to ensure that we are insulated against any interest rate environment in the future, including potentially the return of very low rates at some point, who knows. So the answer to your question is we do need to be vigilant, but it is fundamentally a really interesting and positive moment for Legal & General PRT businesses. Jeff, do you want to have a go at the others.

Sure. Yes. And I have every sympathy with you on insurance company accounting, especially with the change this year to IFRS 17 and we do try and bring out what's really happening in the underlying business, not what's the accounting telling you get clear from the accountants in the front there. But so I will again look at that for next year to try and really explain what's happening in the Q&A and maybe expand on that. In terms of capital ratio, as you say, it's extremely strong, 224%. The movement was reasonably small. We do our best to immunize ourselves to market movements as much as possible, but it's impossible to take all of that noise out of what happens in the solvency ratio. In terms of big picture, what would have happened over the year, there was obviously a record amount of new business, especially around the annuities and the PRT business, which does impact the ratio and what we're writing there, we, again, optimize that as much as possible to be capital efficient. But to the extent that we're writing those record volumes, then that has some impact in our solvency position. And then there was what Antonio referred to, where the excess assets that we're holding, so not the assets back in the annuity business, but the extra assets that we're holding were reduced in value due to the higher interest rate environment. And so that reduced some of that excess own funds as you talked about. That is just a mark-to-market on some very, very long-term assets. We are long-term investors. We have no intention of selling those assets. They are simply moving up and down with the interest rate environment. And as that comes back, we will obviously not realize those losses with an immediate sale. Some of these are 25-year assets where we just simply get the cash flows and have the underlying asset. There was then some other smaller pieces, one of which was actually the impact of buying out our own pension scheme, which relates to your other question, which again, just simply the accounting and the solvency basis had some small negative impacts. But otherwise, there are lots of other smaller items.

Thank you. We've got some questions coming in online. I'm going to assess we take 2 online questions, if that's okay.

Yes. John. Yes. The first one is from [ Mr. Baranka ] who's asked a number of questions, John, but in your policy, we'll take the first one. And what sort of summarizes question. And it follows on from one of the earlier discussions that we had with shareholders and that [ Mr. Baranka ] has seen reports of the sale of [ Carla ] as being considered. And why would the company consider a sale recently stated that we consider it to be a very strong business.

Thank you. It's a very good question. There has been some speculation around this. What I would say first is that -- we're very proud of the performance of cola. It continues to be extremely well run as a business. I think as I said earlier, we feel we are and have been a good owner of Carla we will always approach any question around should we think about selling any business we own from the perspective solely of what is right for our shareholders. And we have an open mind on that. But we don't have anything to say specifically on [ Carla ]. And as and when we do, we would say it, but we have nothing more to say on color at this point. Let's take the next question.

The next question, John is from Mr. Davis, who asks, is Legal & General committed to continue with a progressive dividend policy going forward.

Thank you. Very, very important question. I think the -- I think our shareholders know that the Board of Legal & General fully recognizes the importance to all our shareholders of the -- our dividend of its sustainability and the growth we've been able to achieve over a long period. We're very proud. You may remember that in the COVID pandemic, many large financial institutions chose not to pay a dividend. We were very proud to be able to -- with the endorsement of our regulator to pay a dividend through the depth of the COVID pandemic, and that was, I think, a good choice for everyone. We have an established dividend policy, which takes us up to and including the 2024 financial year of growing the dividend of 5% a year, we'll want to address a future trajectory of the dividend in the Capital Markets Day on the 12th of June, but I would simply say we fully appreciate the importance of the dividend to our shareholders and we'll always take -- the Board will always take decisions around it in that spirit. I think we could take a question in the room, please. Number 1, this gentleman here.

Following on from what you've just said about the dividend. One of my questions was how long can we go on paying a dividend to 20p per share. out of net diluted earnings per share of 7.28p with regard to the sustainability. If I could borrow the Finance Director after the meeting to deal with some queries on the solvency and financial condition report, particularly around the transitional measures on technical provisions afterwards, I need to ask that question. And the other thing is to ask about the data and technology committee. Laura Wade-Gery, I think, took it over in the third -- last quarter of last year. So this is her first full year report in the light of the approximately GBP 83 million materiality for the group determined by the auditors, how much we spend on managing the IT systems and keeping them secure because I know that Laura Wade-Gery now is in addition to that committee, which is assisted by Nilufer von Bismarck and Philip Broadley, many of them have quite a lot of other commitments, both internally and externally. And I'd like to be sure that committee's reports are given them the full weight that the Board needs relative to the IT technology risks that large corporations now face.

I mean on the -- on your first question, I'll ask if Jeff wants to say anything, but I would simply say that in any year, we've paid a dividend that is comfortably affordable for the company in the light of the resources that has [indiscernible] the overall state of the balance sheet and profits we generate in that year. But it's -- we're very proud of the -- say, of both the growth of the dividend and the sustainability of that policy. But Jeff, is there anything you would like to add to those general observations?

Yes. Look forward to catching up on accounting and solvency matters after the meeting, always interest. The -- in terms of dividend cover, and we can cover it later. I mean to some extent, it's an anomaly brought in by the change to IFRS 17, which simply reduced that dividend cover even in the normal course of events. And then if you add on top of that, the impact on some of the assets of the increase in interest rates that I described earlier. The 2 together did, therefore, make that look more pronounced this year. But we look through the solvency lens in particular. We have very -- we have large distributable earnings, so I have no issue in paying the dividend and we look at the solvency lens and the amount of capital that's been thrown off the business and therefore, the coverage for the dividend. So as John said, we're very comfortable with that and the affordability.

I mean on the Technology Committee, Laura may want to add to this, but I just wanted to say 1 or 2 things. It's actually extremely unusual for a large listed company to have a technology committee of the Board. We took that decision a few years ago, and I actually am surprised that more companies don't choose to do this. I think it actually has been hugely helpful to us in focusing attention on both the technology challenges we have like any company, but also the technology opportunities that we have in many areas of our business. And I think the committee has added a huge amount of value to that. I mean, a good example of that would be the persistent challenges of cybersecurity, any large company, any large organization that faces the constant threat of cyber attacks. And the committee has bought sort of relentless focus to ensuring that our defenses are as robust as they possibly can be. Laura took over from me as Chair of that committee. She knows vastly more about technology than I ever shall. And therefore, I feel very, very lucky that we were able to attract her to the Board and ask and invite her to take on that role. She is sparing her blushes, devotes a huge amount of time to the role, and we're very lucky to be in a position that she's able to do that. Is there anything you would like to say?

No, I think I echo John, your sentiments around the value that the committee seeks to add and focus both on what you might describe as the prevent the sort of how do we ensure that technology we are adequately defended and protected but equally, how do we ensure as a company that we are making the most of opportunities whether that's in technology or particularly around data and moves in that regard.

Thank you. Another question from the room, if there is one. Yes, number 4 over here.

[ Monica Rednam, ] shareholder. If you look at Page 64 of the annual report, a very nice layout of the experience of your directors. I would like to ask a question about this. because at the beginning of this century, I stood up in Canary Wharf and complained to us a [ Sir John Bond ] that HSBC should not be taken over a subprime lender in America, when the Board did not know anything about the subject really, and they didn't have the experience. Now looking at your current Board members, apart from the gentleman with a late to the Ontario Teachers' Pension Fund, you're obviously targeting North America now, but there's nobody on the board with much experience or having lived in the state or worked for a number of years in any of the organizations I wonder what your plans are going forward to develop in America and who you can persuade to get the experience you're going to need at board level, if you're doing a major expansion over there.

Thank you for your question, which I think is a really good one. And I completely agree with your philosophy of how Boards should think about the expertise and experience they need. I mean, first of all, I should say, actually a number of members of the Board have done a lot of business in the United States. Good example would be Tushar, who is Finance Director of Barclays for many years, Barclays is huge in the United States. But you may have overlooked Carolyn Johnson, who joined the Board 2 years ago, I think, after a career of many several decades in particularly the United States, life insurance. You also rightly mentioned George, who led RBC's insurance and asset management businesses, including in the United States. . So I don't feel we are at all week in that respect. We also do have a board in the United States, the Board of Legal & General America, which has actually a very strong board. So I think your question is a very one but I feel we are actually and rather good shape. Do we have any more online questions?

Yes, we do. John, we have one from [ Mr. Burch ], who firstly would like to welcome Antonio to the Legal & General family. And his question is with all the increased interest in the U.K. by foreign investment companies, how robust is the company to basically counter-friendly or hostile takeovers. And to what extent would the Board what take to Safeguard shareholders and customers against this?

It's an interesting question. I think it's hard for me to say anything particularly useful because it's a completely hypothetical question. I mean, our role is to manage the business as best we can to the benefit of all shareholders. And also to make sure at any time that we are persuading both investors and potential investors of formidable value that we see in the business. I think it's very hard to comment about any potential approach we could conceivably get without there being such an approach. So I don't think there's anything much more I can say on that, I'm afraid. Any more in the room? Yes, this gentleman here.

[ Chris Borlock, ] ordinary shareholder. Looking at your accounts and your consolidated income statement I assume this account is still very important. And despite all your sophisticated insurance accounts and things which may give a good profit the consolidated income statement, which really should still be very important and important to your creditors doesn't give a very good impression at all. It appears that the profits write down and that the earnings per share are considerably less than the dividend and that the operational borrowings are up a lot. So why is the data in the -- I think what they used to call the memo, the profit and loss account, not a bit of a worry to the Board.

Jeff?

Yes. It's a very similar version of the question earlier. It is really driven by the to a large extent, the changes in accounting. And you'll notice the underlying insurance result is positive as we look at the business, which is aligned with a lot of the Solvency II experience, but you can also see the item that comes through, which is the movement in asset value where they weren't back in liabilities. And that's effectively what has driven the more negative results, coupled with the way that IFRS 17 has changed the accounting. We're confident in our outlook for the business and why that is okay. As I said, we have significant distributable reserves. So no issue in paying the dividend. We have good coverage from Solvency II surplus emerging and we have very good cash flows from the underlying business, significant amount of cash in the insurance business that we can use to make those payments. And obviously, we look to grow in and reduce the earnings volatility from the markets over time. We may even see interest rates go back and we'll get it back. The number will come back the other way in those long-term investments that are simply mark-to-market. And so we're confident in that our underlying business, which is what we look at gives us strong cash flows and strong profits which are covering the dividend, and you'll see that recovery over IFRS 17 as it matures.

I mean this is, as you rightly said in your question, inevitably horribly technical. If it would be helpful, please do catch Jeff or Garvin or [ Al ] sitting -- like sitting ducks in the front row after the meeting, and I'm certain I'll be very happy to take you through the numbers in more depth. I think questioner #2 has been waiting for a while.

My name is [ Mr. Leon Bone ]. I usually ask awkward question, but today is going to be an easy one. You have an advert on the television, which is very expensive for insurance of children and grandchildren, when I found out to insure grandson, the lady first of all say, yes, you can do it. But then he said, it's a bit complicated. She says she could not understand the advert. So can somebody look at the advert, [indiscernible] TV regular every day. And I do wonder if you can tell me what the cost of that advert is to insure because the children, all the grandchildren of the portion on the advert was on it. So if you can answer that question, it's an easy one. The other one may take some time, if you give me a little bit of time to ask the question because I know you're very busy. You've shown the best part of your insurance to L&V, I look at the audit control from last year to this year, and I could not find what happened to the money that you sold to L&V. So can somebody tell us, and it's not your fault, it's audit people, where that money has gone? Has it gone to enhance the dividend, has it gone on to enumeration committee to enhance their pay. So that is a little bit hard one. But the first one, I think you can answer it because you're very good at communication.

On the question about the advertisement on television, I haven't actually seen that advertisement myself, I'm sorry to tell you. But I invite you to speak to Bernie Hickman, who's sitting in the front rover,he is the Chief Executive of our Retail division, and he will certainly know all about the advertisement. So please do have a chat with him afterwards. On the proceeds of LV, I think the answer is it's become capital -- part of the capital resources of the company, and we're deploying it in the way we deploy our capital to invest for future shareholders, except to the extent we distribute capital to our shareholders through dividends. It hasn't been in some way earmarked for some special purpose, I think, is the answer to that.

[indiscernible] I'm not saying it shouldn't go anywhere. That's what I'm saying. I couldn't find it on both audit control from PricewaterCooper that where the money went. It's not disappear in my pocket.

I think the answer is the proceeds from that sale have come to Legal & General. And we deploy them as we deploy all of our capital to the benefit of shareholders. Thank you. Next question, please. Lady here.

My name is Carol, and I'm here on behalf of ShareAction, as you probably know. ShareAction have been attending your AGMs for the last 2 years to ask the Board's position on ethnicity pay gap reporting. We were delighted to hear that you reported your ethnicity pay gap for the first time over last year. We were also really pleased to see that you have achieved your test representation targets at management grade level. So we've met Legal & General for joining its peers in reporting its ethnicity pay gap. Could I ask the Board if it plans to disaggregate its data by the broad sensors categories, on ethnicity as recommended by the CIPD. This would help identify the exact location and causation of gaps. Additionally, would the board be willing to meet with ShareAction and the good work -- does the good work investor coalition to discuss the issue further. And finally, let me say that share action continues to highly value their dialogue with the staff at legal in general on a wide range of ESG topics. And congratulations once again for taking this vital step forward and reporting your ethnicity pay gap.

Well, can I say thank you for your very kind words and say in response that we do value our continuing dialogue with share action. Thank you for what you said about the position on both pay GAAP and the ethnicity targets, which -- and we fully share your pleasure in seeing those results. However, I would just underline that we don't feel we're kind of there yet. And what do I mean by that? Whilst the results so far have been encouraging, we don't feel particularly I think in the most senior ranks of the company that we have quite the level of diversity we would like to see on ethnicity or indeed on gender. On the point you raised about whether we should split out the disclosures, if you don't mind, I'm not going to respond to that off the cuff, but yes, absolutely. We'd be delighted to engage with ShareAction and hear your thoughts on that, and we will certainly consider them. So thank you. This gentleman here.

[ Victor Suk ], shareholder for some decades. The question but rice is up in my mind is what -- why have the funds allocated to shareholdings shrunk so much. There was a time when insurance companies and pension funds accounted for nearly half of the shares issued in the London market. I read recently, it's now down to about 3% which probably is one of the reasons that the FTSE 100 has been a bit lackluster in recent years. I would have thought that having a hefty watch of shares with the dividends flowing in, would have been a sort of bedrock for the company. So I'd like to need the thinking behind the moving away from equities.

Thank you very much for your question. It's a really important question and one that's attracting a lot of attention in policy and political circles as well. I mean the short answer to your question is that the trend you described really relates to the steady closure of defined benefit schemes in the United Kingdom over a period of several decades. And as a result of that, as those schemes have closed, sponsor companies have wanted to have certainty about the cash flows and have, therefore, switched their holdings from equities into fixed interest credit bonds and so on. And that's been a huge trend, not just in the United Kingdom. Now that isn't the full picture, though, because, of course, at the same time, as defined benefit schemes have been steadily closing off and in runoff, defined contribution pensions have been building up. And we are -- Legal & General is the largest provider in the U.K. of defined contribution pensions and those are very significantly invested in equities. So there are big, big structural forces at play here. I think there is a good debate about the future of U.K. capital markets and how to get a bit more life into particularly the U.K. listed equity market. We are absolutely [indiscernible] in those debates and in all sorts of debates about various policy things that could be done. And a number of those we would very much like to participate in. The other thing that I think really needs to happen and it needs to be a sort of shared endeavor between British companies, British investors and the British government is to attract more international investors into U.K. equities, and we believe we can play a role in that, too. But it is -- it's a very significant and important challenge. So thank you for your question. Anymore online? No? Anymore in the room. Yes, gentleman at the back.

My name is [ Sandy Gold ]. How nice is to see your meeting in person, meet everybody and have a chat with directors afterwards in person. What I've seen and heard today [indiscernible] I'm going to buy some shares in Legal & General.

Thank you for your kind words, and we look forward to receiving your order. That will be a nice note on which to end, but I don't know whether there are any further questions. We should inform you that the poll will be closing in 5 minutes. And therefore, I -- well, it says here, I'd like to take 2 final questions, but I'm not sure there are 2 final questions. One here. Yes. Thank you.

[ Scott Wolf ], a shareholder only for 2 decades. Similarly, we made some money out in the pandemic out of the annuities. And I was just thinking if it might be nice if we made a small contribution to a charity for the long-term sufferers of COVID. That's all.

Thank you for the thought. We will certainly consider that. Thank you. . I think there may be no more questions. None online. Very good. Well, [indiscernible].

One Question from Mr. Davies again, which is what are the expectations for future mortality rates and their impact on Legal & General.

I'm afraid that's another one for Mr. Davies.

As if I've been for years. Yes. And actually to the previous point, we did also make some donation to the work with hospitals and research, et cetera. And so there was money on the back of that. The -- but there is a caveat to that, that whilst unfortunately, yes, there was -- we made money on the annuity portfolio. We are also exposed to the mortality side. So in some years, we were broadly neutral, which relates to the question. But in other years, the U.K. experience became better and actually the U.S. mortality experience continued to be worse for our life cover policies. And so probably in totality, we were slightly lost money as an organization around that. What do we think the outlook is. It's very difficult, and there's still uncertainty. What we are still seeing is that mortality is running higher than pre-pandemic levels, but it has reduced significantly, and then it varies a lot by age and by social classes that you put these into. But also, there is a lot of impact of the health service in different countries. And so we've actually seen quite a quiet flu season over the last winter that's just gone. And actually, there hasn't been a large spike in mortality. And to some extent, less strain on the NHS, but we all know there are waiting lists, et cetera. So we try to model these under the different outcomes, and it's seen some uncertainty. But also, as I said earlier, we have in terms of impacts on Legal & General, we are well balanced and then we have the annuity portfolio, and we have the life cover. And so we do see that real diversification in the impacts on our earnings.

Thank you. Perhaps the last question. Thank you.

[ Ian May, ] private shareholder I just want to ask, are people putting enough money in defined contribution pension teams as I'm from the area defined benefit, whether you had to join the scheme and sensible contributions were made.

Very, very important question. The short answer is no, they're not. And we've been making that argument for some years. I think the position is slowly improving, but needs to improve a lot more. And as the largest provider of DC pensions in the country, we have a very strong interest in this topic. I think auto enrollment was an enormous policy success in terms of getting more savings going into defined contribution schemes, which is really important for people's security and retirement. But as you imply in your question, the level at which both employees and employers are typically saving in those schemes is not enough to provide for the sort of retirement that people are actually going to want to enjoy. And we seek to persuade our customers and our corporate -- our big employer clients of that, but we also seek to persuade politicians that that's an important topic for them and that, for example, the contribution rate in the auto enrollment scheme is something we would like to see reviewed in an upward direction. So it's a really important topic.

Yes. And just one point to add that which absolutely the contributions need to be higher. But what we're trying to do also from a Legal & General perspective is making sure that the returns on the defined contribution pensions themselves, the amount are higher. We're a signature to the [ mention ] house compact and we're we will launch shortly this year, a fund where the members can invest in illiquid assets that have higher returns. So that will have a double benefit of helping society because those liquid assets tend to be productive assets in the U.K. economy, but at the same time, improve the returns. Definitely, individuals need to be saving more, and we're doing that from a policy perspective. We believe this is a big strategic opportunity for us. As John said, we're the largest player through both asset management and workplace pensions. And this market is projected to grow in 10 years' time here in the U.K. to GBP 1.5 trillion. So it's a very important opportunity, and we'll work on a policy perspective, but we're very excited about the fact that we'll be able to provide better returns so that people can retire better with those defined contribution pensions. Thank you for the question.

That is the final question. I'd just like to thank you all very much indeed for your participation. Thank you for taking the trouble to come today. That concludes the formal business of the AGM. So I now declare the 2024 AGM closed. I'd like to invite all of you here with us in person to join us for a light buffet lunch downstairs. We have some helpers at the back of the room who will direct you there. Thank you very much, indeed.