A booming UK savings industry helped the life insurer Legal & General to smash market expectations yesterday, as it unveiled a 42 per cent rise in sales for 2006, and claimed it was bullish about prospects for the year ahead.
Britain's third-largest quoted life insurer revealed a 46 per cent rise in UK sales for the year, driven by new business in its retail fund management business, which almost doubled, and growth of more than 66 per cent in its individual pensions division.
Its chief executive Tim Breedon acknowledged that the strong results had been boosted by changes to UK pensions regulations last year, as well as strong sales of pensions term assurance - both of which are unlikely to play such a strong role this year.
Although Mr Breedon said he believes the effects of the pension changes would continue to benefit the company in the short term, he conceded that the effect would eventually fade slightly. Furthermore, pensions term assurance is unlikely to be a big seller in 2007 after the Government scrapped the tax break which had been fuelling its sales.
L&G delivered a record year of sales in its bulk purchase annuity division, which takes on the liabilities of closed pension funds, in spite of increased market competition. A number of new companies have launched over the last year, claiming they are interested in breaking into the bulks market - such as Paternoster and Synesis Life, both of which are run by former Prudential executives.
Although the competition had been expected to stifle L&G, which until recently had enjoyed a near monopoly in the market with the Prudential, Mr Breedon said most of the new players were interested in securing larger contracts, while it was focusing on doing a large number of smaller transactions.
The main blip on the company's results was the performance of its smaller international business, which accounts for around 4.5 per cent of group revenue, where sales fell by some 4 per cent during the year. This was driven by an 11 per cent fall in sales in France, which Mr Breedon says was due to the company's decision to write less protection business in the market. Sales in Holland were flat after they were hit by a regulatory dispute surrounding the transparency of unit-linked bonds. Sales in the US were also flat.
Mr Breedon said he remained upbeat about prospects for 2007, in spite of the recent rises in interest rates, although he conceded that any retraction in the housing market could hit protection sales. He added that the company was targeting double-digit growth again for the year.