L&G retirement profits surge 44% in H1

Retirement operating profits increased by 44% to £406m. Annuity sales rose by 186% from £1.3bn in H1 2015 to £3.8bn, boosted by bulk annuity sales of £3.6bn after a £2.9bn back book transaction with Aegon.

Legal & General Retirement also saw rapid growth in its lifetime mortgage sales with advances of £231m compared to £37m in H1 2015.

L&G entered into the lifetime mortgage market in early 2015 with the acquisition of Newlife.

However its savings business saw an 11% drop in profits to £49m, while its insurance operating profit fell by £48m to £138m.

L&G attributed the loss to a £40m lower expected release from the UK Protection back book, adverse mortality experience of £18m, mainly in its Group Protection business, and the introduction of the annual Flood Re levy for its GI business of £9m.

Nigel Wilson, Group Chief Executive, said: “There are many different views of the outlook for economic growth, the state of financial markets and political uncertainty. We reflect this in our approach to risk management. While we cannot be immune to this uncertainty, we remain confident that we will continue to deliver attractive returns for shareholders, great value to customers and better outcomes for society. Our five long-term growth drivers, ageing populations, globalisation of asset markets, creating real assets, welfare reform and digital remain unaffected and will continue to provide many growth opportunities.”

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown, added: "Demand for L&G's bulk annuity schemes and liability-driven investment products should remain strong, as more companies seek to de-risk their defined benefit pension schemes. The UK DB market alone is worth an estimated £2,000 billion.

"The new equity release product is proving very successful as people increasingly turn to housing value to supplement retirement income.

"L&G serves markets with a lot of inherent growth potential. They have a 20% share of the auto-enrolment pensions market, and by 2018 the vast majority of employees will have to have been signed up by law. Contributions from its auto-enrolment pension scheme members should rise strongly over the next few years. It has plenty of scope to sign up new schemes too, with the number of people auto-enrolled expected to treble by 2030.

"International expansion should open up further opportunities for the group. Last October, L&G signed its first bulk annuity contract in the US. The US defined benefit market is four times larger than the UK, and demand for de-risking solutions is growing rapidly. The deal gives L&G an important foothold in this market, and the opportunity to build its market share.”