Group Chief Executive

Eighteen months into your tenure as Group Chief Executive, how do you see Legal & General's strategy changing?

I don’t see strategic change as being necessary. We have in place the key elements for future success: a broad set of high quality products, balanced distribution, scale and the operational infrastructure to support it, a huge depth of skills and experience, a well-known brand, and a strong balance sheet.

That is not the same as saying that it is sufficient to continue exactly as we are. Far from it. We must aim for continuous improvement in all that we do and be ready to exploit new opportunities. The challenges I see are twofold. First, we need to continually refine our products and processes so as to provide value for money, customer responsiveness, and high quality service. Secondly we need to build in flexibility to adapt to future changes, for example to regulation or the way customers interact with us via new technology.

Legal & General is already good at responding to change, I want to place more emphasis on anticipating change and indeed driving it where that is in the interests of our customers and shareholders.

What are your operational priorities for the Company?

The current operational priority for Legal & General is to continue to earn attractive margins on new and existing business.

Specific priorities vary across different business units, and partly depend on our market share and how established we are in that sector. In Wealth Management, we are still growing our presence and developing new products, including an International Bond and a Group SIPP. In Protection and Annuities we are an established market leader, but we have to adapt to market changes such as a growing focus on pension scheme buyouts, while continuing to maximise our pricing and administrative expertise. In General Insurance, we are concentrating much more closely on the domestic sector and adding new products targeted specifically at the householder. And in LGIM, we are supplementing our market leading index-tracking fund management franchise with new capabilities including Liability Driven Investment and higher margin active equity management.

The Legal & General investment story seems to focus a great deal on capital. What should shareholders expect?

There is a commentary on capital within this report, which will bring you up to date on our ‘balanced scorecard’ and our plans for returning capital.

Capital strength is a strategic differentiator for us. A strong capital base means distributors and customers can be confident that we will be there when they need us, and that we will remain secure even through more difficult markets. Capital must, however, be used efficiently – we need to have the right amount of capital, of the right type, in the right places, and the ability to move capital around the Group to where it can best be employed.

That is the objective of the rolling review of capital led by Andrew Palmer, your Group Director (Finance). We aim to review our capital position regularly, and we will use excess capital as the basis of returns to shareholders where it is right to do so.

What do you see as the right balance between UK and international business for Legal & General?

Over 90% of our business is UK-based. We believe there is still capacity to grow here, and I don’t foresee any dilution of our commitment to our home market.

Our overseas businesses make a good contribution to profits. We are open-minded about looking at new international opportunities, but are rigorously selective about allocating resources overseas. We are very focused about the size of our investment and the returns we expect to achieve.

The markets and partnerships we are interested in are those where we can bring our skills to bear and where we can create significant added value by applying our product and distribution expertise.

Tim Breedon
Group Chief Executive