News Column

Legal & General Profit Rises 7% Despite Drop In Individual Annuities

August 6, 2014

Samuel Agini

LONDON (Alliance News) - Legal & General Group PLC Wednesday reported a 7.1% rise in pretax profit, driven in the main by the performances of its retirement and private equity arms.

Legal & General increased its interim dividend to 2.90 pence from 2.40p.

In a statement, the FTSE 100 life pensions and investment company reported a GBP636.0 million pretax profit in the six months ended June 30, compared with GBP594.0 million in the corresponding period last year.

Increases in Legal & General Retirement operating profit, up by a quarter to GBP188.0 million, private equity arm Legal & General Capital, up 19% to GBP102.0 million, and in both its investment management arm and assurance society, each up by 5%, more than offset a 19% drop in the operating profit of its America arm.

Net cash generation increased to GBP567.0 million from GBP500.0 million, driven by operational cash generation largely due to a rise in cash in the retirement arm, reduced new business strain in LG Assurance Society protection and savings, as well as improved positive new business surplus for annuities.

The retirement arm more than quadrupled bulk annuity new business premium to GBP3.1 billion from GBP700.0 million, driven by a contract covering GBP3.0 billion of the ICI pension fund's liabilities. However, individual annuity premiums fell to GBP400.0 million from GBP700.0 million due to changes introduced in the UK removing the effective requirement for people to buy annuities upon retirement. Individual annuity sales were down 49% to GBP383.0 million.

"We remain confident that we will exceed the GBP4.1 billion of annuity premiums written in 2013 as we continue to have a strong quote pipeline. Due to their inherent complexity and size of bulk annuity deals, the timing of deal flows will be unevenly distributed between quarterly reporting periods," Legal & General said in its statement.

Legal & General Investment Management saw assets under management rise by 7% to GBP465.1 billion, driven by GBP10.4 billion of net inflows.

Legal & General said that its private equity arm is broadening its asset base and that it sees "increasing opportunities and growing pipeline" as its direct investment capability develops, including EUR250.0 million into European SME loans through its investment in Pemberton Asset Management and developing a UK Private Rented Sector portfolio.

"Strong business performance across a well-diversified range of insurance, savings and investment markets underpins consistent earnings quality and dividend growth and enables us to respond positively to the ever changing political and regulatory landscape," Chief Executive Nigel Wilson said in a statement.

At the open Wednesday, Legal & General shares were off 0.4% at 230.76 pence.

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Source: Alliance News

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