Legal & General Group PLC (LON:LGEN) said on Wednesday that it expects its strategic plan for the investment management arm to boost profits and believes it is well positioned to deliver “attractive growth and returns”.
In a statement ahead of a capital markets event for the Legal & General Investment Management (LGIM) business, the group said it sees the division achieving operating profit growth of between 8% to 10% per year “over the medium term, assuming normal market conditions”.
The strategy for LGIM, which has nearly £1trn in assets under management, includes broadening investments, addressing the savings gap through its defined contribution pensions, retail and personal investing businesses and focusing on core strengths.
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“We are building on our market leading standing in UK defined benefit pension solutions and achieving strong growth in defined contribution pensions and retail markets,” said LGIM chief executive Mark Zinkula
“We have a clear strategy to be one of the global winners in asset management by continuing to expand in the US, Europe, the Gulf and Asia."
Group chief executive Nigel Wilson said: “LGIM's long-term success in the UK and growing success internationally has bolstered Legal & General Group's impressive double digit operating profit growth over the past decade.
“The addressable market in global asset management is approximately US$80trn providing a huge growth opportunity for our efficient, customer-focused and well diversified business.”
UBS maintains 'sell' rating on L&G
UBS said the operating profit target appears to be in line with consensus forecasts and is higher than the 8% compound annual growth rate achieved since 2012.
But the investment bank maintained a 'sell' rating on the stock, saying it thinks the profit target is "ambitious given prior growth was supported by above normalised market returns, with our work showing some challenges to growth in its UK corporate pensions business, which drives around 60% of earnings and cash".
UBS expects flat asset growth in L&G's corporate pensions business assuming normalised market returns of about 5% per year, leading to 4-5% annual operating profit growth to 2020.
Shares were little changed in early trading at 269p.