CEO Introduction.
A Responsible Business Delivering.
Our core purpose as an industry is to provide our customers with ‘safety in
numbers’, enabling the pooling of premiums and sharing of risks to spread
the financial impact of the negative events that will inevitably happen to some
of them.
Without our industry each of those individuals would have to provide for their own
future independently without the benefits of sharing the burden of risk with others.
For the majority, this just would not be possible.
In 2010 we were pleased to work in partnership with Business in the Community (BITC) to
show that there is a strong link between good Environmental, Social and Governance
(ESG) management and Total Shareholder Return (TSR). The results signalled to the
investment market and business in the community members that good management of
ESG risk could help your business out-perform the average TSR by 14% in 2009.
As one of the biggest investors in the FTSE 350 we reinforce this through LGIM’s
Corporate Governance Programme. In 2010 this business signed up to the United Nations
Principles for Responsible Investment (UNPRI) and also reported on its compliance
against the new Combined Code on Corporate Governance. Both are good and rigorous
standards to be judged against.
Positive economic impact of our business
We remain firmly committed to the UK marketplace. 90% of our profits come from the
UK:
- We make profits, pay taxes, employ people and pay dividends in the UK.
- We are a major shareholder in the UK, managing 4% of the FTSE 350 on behalf of our
clients, and providing good governance over those assets.
- We continue to shape the agenda of the Green Investment Bank as a provider of capital
and thought leadership to this important emerging economic area.
- Many of our protection products complement welfare benefits offered by the state.
Social impact of our business
In addition to delivering returns for our shareholders and customers we believe
that as a business, we have a responsibility to take a position of leadership in
broader society. We aim to ensure that we relate to the day-to-day lives and concerns
of our customers, and as a shareholder we aim to set new and higher standards of
stewardship and engagement with the businesses in which we invest.
Environmental impact of our Business
Our philosophy is to understand the direct environmental impacts of the business
we manage and of those in which we invest. We are now financially accountable for
our carbon emissions through the Carbon Reduction Commitment. We need to forecast
our business activities and the emissions they will generate and account for them.
We believe we are well placed to limit the impact of this change through the management
of our own operations and the procurement of energy by our venture capital and commercial
property portfolios.
A company that campaigns
We continue to focus our CSR efforts around issues that fundamentally impact our
business.
In 2009 we set out our campaigns and in 2010 we have continued to work with our
Third Sector partners to improve our understanding of these issues.
Our six key CSR campaigns are:
- Health Matters – to understand health trends, changes and innovation
and the impact on our business.
- Saving Matters – to understand what motivates people to save and how we can
help.
- Good Governance Matters – improving governance and risk management for ourselves
and other companies.
- Housing Provision – the need to create housing opportunities for all.
- Sustainable Property Matters – creating commercial value by designing sustainable
property portfolios.
- Pensioner Poverty Matters – supporting retired people, who are living longer,
typically on fixed incomes.
We have made good progress on these issues in 2010. In 2011 we aim to further extend
this knowledge into product design, allowing us to deliver products and services
that help to solve society’s issues, making the benefits of insurance and
saving more inclusive and accessible.
Stakeholders opinion
2010 has seen an increase in external stakeholders asking for information and opinions
on the way we run our business. I am pleased to report that we have delivered strong
performances in this area.
We have seen an increase in the number of employees who think they work for an ethical
company (79% in 2010 versus 74% in 2009).
I am pleased to report in 2010 that we have:
- Reduced the number of complaints from our customers from 0.53% to 0.47% of
total number of customer policies.
- Increased the number of people we have helped back to work and rehabilitated through
our group protection businesses.
- Increased the number of claims we have paid out to our critical illness customers
to a five year high.
- Increased the total amount of pensions that we pay out to customers. Each year we
pay out £1bn in annuity payments.
- Increased our funds under management to £354bn.
In 2011 we will ask our customers at the point of delivery, not just at the point
of sale, whether their product has delivered what they expected.
Creating a good place to work
We employ over 8,000 people worldwide. With this comes responsibility. We understand
the need to develop responsible employment standards in both our UK and overseas
operations that encourage the flow of people and ideas across our company. We also
consider the implications of the UK Bribery Act and the UN Guiding Principles for
Human Rights in the running of our business.
In 2010 we have benchmarked our overseas subsidiaries in the USA, Netherlands and
France against rigorous standards from experts such as Bureau Veritas and Business
in the Community. In 2011 we will continue to evolve our responsible business agenda
for these operations in line with Group standards and local custom and practice.
Summary
The country’s economic position has led to a review of the costs of state
provision in several areas of welfare. Responsibility is shifting to individuals
to protect themselves against risks that the state would previously have carried.
The insurance sector is well positioned to help with this transfer of risk. We will
continue to work to develop products and services that deliver the right benefits
to the right people in the right way and at the right time.
Tim Breedon
Group Chief Executive and Chair of Group CSR Committee
Legal & General Group Plc