Legal & General Insurance, the protection arm of L&G, saw profits climb 52 per cent to £134m in the first half of 2021 despite Covid-19 claims totalling £79m so far this year.
The business had provided for adverse claims in its 2020 results, but said around £30m of the £110m it set aside “remains unutilised”.
It put the £79m in claims down to “the significant impact of the second wave in both the UK and US”, despite experts suggesting it would cause less economic pain than the first.
Across all its insurance products, LGI paid £1bn in gross protection claims over the six months to June - meaning Covid-19 claims made up 7.9 per cent of its pay outs.
“Our reinsurance strategy, which reinsures virtually all LGI's UK retail protection business, has substantially reduced the impact on LGI of higher claims,” the firm said in its interim results. ]
“Although we retain the majority of our exposure in the US and in UK group protection.”
In the UK, LGI's retail protection gross premiums rose to £714m, compared to £680m this time last year. Its UK group protection gross premiums rose by a similar amount, climbing from £245m in H1 2020 to £274m in H1 2021.
LGI's UK arm accounted for around 72 per cent of the business' overall profit, bringing in £96m compared to its US counterpart, which brought in a lesser £38m.
The insurance arm intends to continue targeting "mid-single digit growth" in its UK protection revenues. It expects H2 2021 to deliver "greater operating profits" than H1.
But it added that group protection new business volumes “may not reach the record levels of 2020 as, typically, fewer large schemes are tendered in odd years than in even years”.
Investments in adjacent markets
The group also credited LGI's £134m profit to "technological innovation" around making products more accessible to customers, as well as its investment across its own systems and platforms.
L&G has also made a series of investments in third-party platforms covering what it calls "adjacent markets" to protection.
One such investment is its 41 per cent stake in UK fintech Salary Finance, an employee benefits platform business which last year acquired its rival, Goldman Sachs-backed Neyber, after reports suggested it was on the cusp of administration.
L&G is a primary investor in Salary Finance alongside Blenheim Chalcot, a UK-focused digital venture builder.
The group said the fintech is now connected to more than 3.8m employees across the UK and US. Annualised run-rate gross revenue grew to £29m at the end of June 2021, marking year-on-year growth of 75 per cent.
The major stakeholder said it expected this trend to continue "with growing employee awareness and increasing platform engagement".
One of Salary Finance's main products is its pay day advance, which lets employees access up to 50 per cent of their earnings early each month.
Diversified business growth
Across its five businesses, L&G said its "diversified business model" meant it was able "to weather the volatility of 2020" and was well positioned to deliver profitable growth again in the first half of 2021.