being a disruptor is a privilege and a responsibilitybeing a disruptor is a privilege and a...

Dr Nigel Wilson Chief Executive Officer Legal & General Group

LEGAL & GENERAL GROUP PLC

Being a Disruptor is a Privilege and a Responsibility TCS Summit, Europe 2015 October 2015




2


FinTech has disappointed to date, but government policy has driven digital disruption. Businesses, consumers and regulators will now accelerate their digital capabilities.

Charles Babbage First Machine Age: Big Data

Trust + Respect Peer-to-Peer

SECOND MACHINE AGE: L&G: manages digital money, engages digitally and builds digital cities.

FIRST MACHINE AGE: L&G: formed in a coffee shop in 1836 as a UK Peer-to-Peer company using big data.

From 1830’s Cyberpunks to the Creators of Digital Cities

3


• Market share in UK Protection has grown from 6% to 24%

• LGIM - AUM has grown from $138bn in 1998 to $1.1trn at June 2015

UK Protection Share $138bn

LGIM AUM

Retail Protection GWP

£1,046m

$138bn

L&G: Successful Digital Disruptor in an Analogue Era

4


Technology: the Implications of the Second Machine Age

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

Hollowing out of middle management – business “distributes and downsizes”

Digital investment is dis-intermediating low paid jobs – higher paid jobs becoming more higher paid

Increasing demand for clean energy – economics are improving and climate change is a real concern

Digital Advice – financial services needs to step up and fill the void – “Robo advice” is key, including welfare

Physical is being replaced by Digital – FS industry likes to finance physical assets and regulation prefers physical and analogue

Digital in healthcare will be transformative for our industry – we have to disrupt

The internet of things will be transformational – huge impact on GI business

5


Andy Haldane, Chief Economist, Bank of England: “One interesting solution would be to maintain the principle of a government-backed currency… issued in an electronic rather than paper form. This would preserve the social convention of a state-issued unit of account and medium of exchange, albeit with currency now held in digital rather than physical wallets.” “In its short life, Bitcoin has emerged as a monetary enigma. What I think is now reasonably clear is that the distributed payment technology embodied in Bitcoin has real potential. On the face of it, it solves a deep problem in monetary economics: how to establish trust – the essence of money – in a distributed network.”

Andrew Haldane, Chief Economist, Bank of England

Money is the Ultimate Digital Product

Bitcoin: the Napster of Financial Services?

6


DISRUPTION

CLOUD COMPUTING Multiple Applications – Big

Data Processing for Analytics and Risk Management

BLOCKCHAIN Unrealised Potential –

Decentralised Ledger for Payment Processing

INTERNET OF THINGS Multiple Applications – Telematics, Lending,

Leasing and Insurance

Cloud Computing + Internet of Things + BlockChain = Disruption

Have corporates learned the lessons? Can disruption move in-house?

7 7


L&G: A clear and focused strategy for a Divergent World

• The world is getting older, people live longer and have not saved enough for retirement • Over 60’s have c£1.3trn of housing equity, increasingly used to fill this savings gap • $10trn of defined benefit liabilities globally, with increasing demand for de-risking

solutions

GROWTH DRIVERS AGEING POPULATIONS

GLOBALISATION OF ASSET MARKETS

WELFARE REFORMS

DIGITAL LIFESTYLES

BANK RETRENCHMENT

• Asset markets around the world are becoming increasingly homogenous • This creates attractive opportunities to grow and internationalise our successful

investment management capabilities

• Pressure on public finances is moving the provision of welfare from the state to individuals and employers

• Shrinking state funding will drive demand for the private provision of protection products

• Changes in digital customer engagement are presenting both opportunities and challenges to all companies

• Using digital capabilities to generate scale and efficiency will be key

• Retrenching banks create opportunities for investors with long term investment horizons to invest in real assets

• Real assets provide enhanced risk adjusted returns if executed well

8


Digital for Employees: to improve Productivity and Engagement

Mobility Social Cloud Big Data

A group wide seamless, agile and integrated digital workspace where all of our people

connect with colleagues, systems and content through a single point of entry – at any location

– at any time.

Sharepoint

Lync

Yammer

9


Launched March 2015. eBook series to help navigate personal finance. Available on desktop, tablet and mobile. Distributed through key digital media. Tested with our online customer community.

Rich content Strongly visual

Global first for Google and L&G. Live and on-demand video series. Over 1,000,000 views of video content, 97% viewing in full edited short clips.

Rough Guide to Personal Finance series

#MoneyHangout

L&GLive (in beta)

Driving Digital Engagement for Customers and Colleagues

10


“…. mechanism to protect poor people against risk.... in exchange for....payments tailored to their needs, income & level of risk Aimed (primarily at developing) world’s low income workers, especially those in informal economy.... ignored by mainstream.....” Micro insurance offers a scalable, low cost, value for money proposition for these customers that can be delivered directly through the use of digital solutions and retail distribution partners.

Micro-insurance: 5 million customers in six months in India

5.6bn people (80% of world population) live on less than $10 a day

11


3 minutes to policy issuance

Micro-insurance launched in India in 2014 people globally with no access to

conventional sources of insurance

people have between $1.25 and $4.00 per day and could afford ultra-low cost micro-insurance

of premiums per year, or c.$10 per person per annum

L&G plan to establish a strong position in the MMI market. Quidcover suitable for low SEG customers.

Many of these potential customers could become increasingly valuable as the middle class grows, acquires assets and has surplus income to save and invest.

4bn

2.7bn

$40bn

Premium of $3-$5 per month for $3k

cover

Quidcover – using big data and digital delivery

12


LIFETIME MORTGAGES

Mar 15 Apr 15 May 15 Jun 15

Re-platform begins

Acquisition completes 31 March

Rebrand begins

Re-platform completes (£480k)

Rebrand Complete

Sept 15

Applications per week £1m £2m £3m £5m £10m

Successful low cost entry into lifetime mortgages

13


Size of global asset market: $222trillion

Cost and availability of human advice: £125 an hour

Gen Y accustomed to automation Low-fee model wealth management here now, but sub-scale Big Data incorporation

Next: Complex financial planning applications made simple

Education: Communication and tools

From Execution to Education: Robo-advice

Growth industry: already $19bn AUM as at end 2014. Good for digital customers, challenging for analogue regulators?

14


Investment is required to deliver growth

(1)

(2)

(3)

(4)

DM economies have over-consumed and under-invested – EM economies have under-consumed and over-invested

The tsunami of digital money is moving around the world’s asset markets, bidding up the price of existing assets, then rapidly exiting, causing volatility to increase and returns to fall

Public and private investment is too low – we need a change in policy and approach

“Fed Watching” by the market is being replaced by “Market Watching” by the Fed

(5) Moore’s Law is relentless

15 15


L&G: Long term direct investments

We continue to drive risk-adjusted returns upwards through direct investments in long dated real assets where the banks have left behind ‘white space’. Investment in housing and regeneration are economically useful for us, for the broader economy and socially useful too.”

£15bn Places for people: £252m, acquiring 4,000 homes, building 7,000 houses, 50 year lease

Thames Valley Housing: £40m, 25 year facility enabling 500 affordable homes

Royal Liverpool University Hospital: £429m rebuild

English Cities Fund schemes in Liverpool, Plymouth, Canning Town, Salford and Wakefield: over 5.4m sq ft of mixed-use space, brownfield land

Transport and Logistics: £320m, maturities to 30 years

Aberdeen international business park: £127m investment, 335,000sq ft office space

CALA Homes: £210m investment (47% stake), further £200m for Banner Homes

Hyde Housing Group: £102m investment 15 year facility

Sentinel Housing: private placement (registered social housing provider in Hampshire)

University of Southampton: £93m, 1,104 beds, 40 years income

Methodist Care Homes: £70m investment, 30 year lease

Media City, Salford Quays: £503m investment . 50% ownership PRS Investment – 100s of new homes

£162m Leeds regeneration project: 200 acre mixed use site with potential for 7,000 homes

£400m Cardiff city centre redevelopment joint venture

£200m Bracknell regeneration partnership with Schroders

16


L&G’s Investment in a £400m Development - Cardiff

“Our Towns and Cities aren’t overbuilt, they’re under-demolished”

Digital infrastructure investment’ multiplier: key

to economic growth – a collective responsibility

20:1

Direct Investment programme over five years

Building Digital Cities: part of our £15bn Investment in Infrastructure

17


CUSTOMER ENGAGEMENT

PROGRAMMATION AND AUTOMATION

OMNI-CHANNEL

GLOBALISATION AND EXTENSION

INTERNAL CULTURE AND CAPABILITY

A single customer view and one self-service estate at the heart of L&G, across all channels.

We need to listen, measure and learn. We need to connect and influence. And we need to optimise these opportunities.

Insight of customers using programmatic to personalise and target experiences. Providing customer service automation to deliver a high quality, low cost customer

experience.

A multichannel approach providing the customer with a seamless experience across all channels and devices, Mobile, Multi-Screen, Tablet, Wearables, IoT.

Building a platform that allows for globalisation and scale.

Creating an agile and future-focused organisation underpinned by a great employee experience.

SINGLE L&G LED BY CUSTOMER

L&G: One firm, one set of values, one set of behaviours

18


What is productivity in a digital world? What are the implications for employment? What are the implications for inequality? Successful businesses will ride the digital wave. Can government respond? If so, how?

Questions for Policymakers:

The Second Machine Age: The impact of Digital Disruption

19


Is the global macro economy moving to a digital world of zeros? Downside

Analogue Economy Paper Money

% change

Digital Economy Digital Money

% change

- Economic growth 2 - 4 0

- Nominal interest rates 4 - 6 0

- Real interest rates 2 -3 0

- Inflation - Normal - Hyper

3 – 10 10 – 30 0

- Wages - Nominal - Real - Hyper

4 – 6 2 – 3

10 – 30 0

- Currency Fixed with “crashes” Volatile

“We cannot solve our problems with the same thinking we used when we created them.”

- Albert Einstein

20


“Insurance has a powerful social purpose. We make a promise to our customers that we will be there to stand behind that promise when disaster or tragedy strikes. Our clear aim is to be a force for good in society, make every day matter for our customers and colleagues and live by the promises we make in our high quality products.”

Every Day Matters: our Social Purpose

http://www.google.co.uk/imgres?imgurl=http://static.housingcare.org/_affil/hc/images/logo-print.gif&imgrefurl=http://www.housingcare.org/&usg=__80KjK53VBgCQN3QVrszdccV1w_A=&h=85&w=401&sz=6&hl=en&start=1&zoom=1&tbnid=eh5USgGpaFhGpM:&tbnh=26&tbnw=124&ei=01z2UO2zFcia1AWFsYDgBg&prev=/search?q=elderly+accommodation+counsel&hl=en&gbv=2&tbm=isch&itbs=1

http://www.google.co.uk/imgres?imgurl=http://www.actuaries.org.uk/sites/all/files/u12806/ILC%20logo_0.JPG&imgrefurl=http://www.actuaries.org.uk/events/pages/ilc-uk-and-institute-and-faculty-actuaries-joint-debates&usg=__99KeVQAz4Qu-7r2I65HQegeeW5o=&h=447&w=800&sz=23&hl=en&start=2&zoom=1&tbnid=KZ06HQD3akx4OM:&tbnh=80&tbnw=143&ei=LKSsUeLRH6GS0AXtloCoDQ&prev=/search?q=international+longevity+centre&um=1&sa=N&hl=en&gbv=2&tbm=isch&um=1&itbs=1&sa=X&ved=0CC4QrQMwAQ

http://www.google.co.uk/imgres?imgurl=http://westhouse.cswebsites.org/Libraries/Local/779/Images/david's%20pictures/CAF%20logo.jpg&imgrefurl=http://westhouse.cswebsites.org/default.aspx?page=17775&usg=__EWhnCNrrqjW5JMrXGReRks6KBFg=&h=84&w=218&sz=8&hl=en&start=18&zoom=1&tbnid=6RR6HzAIxhlkGM:&tbnh=41&tbnw=107&ei=yMn2UM_CNJOM0wXRmYGoBQ&prev=/search?q=caf+logo&hl=en&gbv=2&tbm=isch&itbs=1

http://www.hact.org.uk/

http://rnli.org/Pages/Default.aspx

http://www.bhf.org.uk/?sc_id=FrontNAV-BHF%20Logo&utm_source=FrontNAV-BHF%20Logo&utm_medium=FrontNAV-BHF%20Logo&utm_campaign=FrontNAV-BHF%20Logo







THANK YOU.

being a disruptor is a privilege and a responsibilitybeing a disruptor is a privilege and a...

Documents