Legal & General has seen marginal losses during the third quarter across individual annuities, protection and self-invested personal pensions, although overall net cash generation for the group was up 14 per cent year-on-year.
Total annuity assets increased by 8 per cent to £43.1bn, from £39.9bn in the third quarter last year, although actual annuity sales were £1.5bn, down from £3.9bn during the third quarter year-to-date last year; a figure boosted by 2014’s buy-in transaction with the ICI pension fund.
However, following the Budget reforms, individual annuity sales were down 48 per cent at £262m - compared to £508m over the same period last year.
“We have seen the proportion of people taking their pension savings as cash increase to 90 per cent from 60 per cent before the introduction of the pensions reform legislation,” read the trading update, adding that the average payment size is £12,000.
Lifetime mortgage completions were £102m year-to-date, with £65m of advances in the third quarter and applications currently running at around £10m per week for the new business line.
UK protection premiums increased 3 per cent to £1.1bn, up from a third quarter year-to-date figure in 2014 of £1.07bn, although new business sales reduced marginally to £174m from £178m.
Retail protection sales were also down slightly to £121m from £124m in 2014, although new business of £42m was up from £41m.
L&G’s network facilitated over £32bn of mortgages - up from £29bn during the third quarter year-to-date in 2014 - reinforcing the mortgage club’s position.
The group’s platform business Cofunds generated further year-to-date net flows of £2.6bn - up from £4bn over the same period last year - with total assets under administration up 6 per cent to £73.1bn, from £69bn.
Finally, Sipp business Suffolk Life generated net flows of £500m year-to-date, a slight fall from £600m over the same period in 2014, with assets under administration of £8.2bn - increasing from £7.5bn.
The statement noted the outlook for individual annuities will remain subdued, although L&G is on track to write up to £200m of lifetime mortgages this year and increasing amounts thereafter.
“We intend to invest £15bn in direct investment across the group, over the medium term, matching the illiquid nature of our liabilities and solvency capital requirements to deliver more attractive risk adjusted returns to our shareholders.”
In insurance, L&G expects new business volumes across the UK protection business for 2015 to be broadly in line with 2014. “We are expanding our digital capabilities, increasing the efficiency of our proposition in a mature and competitive market,” the document added.
In savings, following the closure of the with-profits fund to new business in January, contributions from the mature savings business are being managed, with cost efficiencies identified to compensate for the gradually declining asset base.
“As part of a strategic review of our digital savings business we will focus on improving operational efficiency in Cofunds,” it added.
The original group-wide target to achieve £80m of operating cost savings this year - reducing costs from £1.25bn in 2014 - will incur circa £40m of restructuring costs this year to deliver.
Nigel Wilson, group chief executive, said: “External political and regulatory uncertainties remain, but we believe that by aligning our strategy to macro trends we have created a high degree of resilience in our business model and are well positioned for further growth.”
peter.walker@ft.com
