Q3 2008 Interim Management St

RNS Number : 9611F

Legal & General Group Plc

16 October 2008

 



Stock Exchange Release 

16 October 2008            

Robust financial position, new business up 5%

Highlights for the 9 months to 30 September 2008⁽¹⁾

Worldwide new business £1,137m (9M 07 £1,085m)                               up 5%

UK new business £1,047m (9M 07 £993m)                                                 up 5%

UK Risk: new business £381m (9M 07 £295m)                                          up 29% 

Pension buyout sales more than trebled                                                       up 226%

Group protection sales continue to grow                                                      up 13%

UK Savings: new business £666m (9M 07 £698m)                                    down 5%

Unit trust and ISA⁽²⁾ sales remain strong                                                       up 35%

Non profit pensions boosted by SIPP success                                              up 27%

Unit linked bonds remain at lower levels as anticipated                                 down 49%

Investment management gross new funds £28.3bn (9M 07 £33.4bn)

IGD surplus £2.9bn at end of September⁽³⁾

Tim Breedon, Group Chief Executive, said: 

'These results once again underline the strength of our broad distribution model, high quality product offering and robust financial position. We remain at best cautious about the economic outlook for the UK, but are confident that we are well positioned to exploit opportunities throughout the current economic cycle.

'These are uncertain times for everyone. We welcome recent actions by the Government to underpin confidence in the UK banking sector and hence the wider economy. It is in these challenging markets that businesses with solid foundations can mark themselves out in their ability to continue to deliver for customers and shareholders over the long term.' 

Business Commentary    

Legal & General has three main businesses: Risk, Savings and Investment management. Our UK Risk and Savings businesses generated combined APE new business of £1,047m, an increase of 5% on the same period of 2007. Worldwide APE new business stood at £1,137m, also up 5%. Our institutional investment management business delivered a further £28.3bn of gross new funds.

UK Risk business

Protection

New business was lower in the first nine months at £158m (9M 07: £168m) as the slowing housing market continued to have some impact on individual protection sales.

UK mortgage approvals have fallen 36%⁽⁴⁾ to the end of August, while our individual protection sales were down only 13% to the end of September. We continued to exploit opportunities across our broad product offering, through increased focus on our wide range of non mortgage related products, including family protection and high sum assured business.

Group Protection grew, with employers still keen to secure competitive and attractive protection for their employees. Sales were up 13% in the first nine months of the year. Quotation activity remained high in Q3, with an increased emphasis on benefit design.

Annuities

New business grew 76% in the period to £223m (9M 07: £127m), continuing the trends seen in the first half of the year. 

Bulk Purchase Annuity (BPA) sales were once again up strongly, more than trebling in the first nine months, and more than doubling in Q3 relative to the previous year. The market for open pension scheme buyouts has continued to deliver strong sales in Q3, albeit at a lower level than the average for the first half of the year. We have been more cautious over the last three months in the large schemes area, where highly volatile credit and swaps markets have increased pricing and execution risk. We remain particularly strong in the small and medium sized schemes market. We have written a total of 172 policies so far this year, with an average case size of £9m. 

Sales of individual annuities were lower at £60m (9M 07: £77m), reflecting our caution in pricing and our focus on the significant opportunities in the BPA market.

Outlook

A resilient application pipeline means protection sales should remain around current levels for the rest of this year, with a continued focus on non mortgage related products. We also see opportunities for further progress in our Group protection business, where quotations remain at a high level.

Our annuity business has significant long term opportunities given the scale of potential demand for pension buyouts and demographic demand growth in individual annuities. As indicated we have recently reduced our activity in the larger schemes market, as a result of asset market illiquidity and volatility. The pipeline of quotations remains at a very high level and a return to deeper, more liquid credit markets may help to stimulate closure of larger schemes, though this remains unpredictable in the short term. 

 UK Savings business

Non profit pensions

Our non profit pension business reported strong sales growth of 27%. Within this result we saw progress in both corporate and retail pension sales. We have continued to refocus our business towards modern and flexible pension products, including SIPPs, which accounted for 56% of retail sales. This includes ongoing momentum in Suffolk Life, the specialist SIPP provider which we acquired earlier this year. With an average retail SIPP case size more than treble that of non SIPP products, the strategic development in our business is increasingly evident. We are now the number two provider of SIPP products in the UK⁽⁵⁾.

Unit linked bonds

The unit linked bond market has materially reduced in size this year and we believe we have performed broadly in line. The reduction reflects the impact of CGT changes as well as current retail investor sentiment. Notwithstanding this, net sales were positive in the period, whilst gross sales volumes were lower at £101m in the first nine months, down 49% (9M 07 £198m). 

Retail investments 

Strong progress in our core retail investment business (unit trusts and ISAs) continued, with sales up 35% to £168m, including a strong contribution from our distribution relationship with Nationwide Building Society. While we continue to build our range of products in this market, our traditional strengths in passive, fixed income and balanced funds continue to resonate in current conditions.

With-profits  

With-profits savings volumes of £151m were 17% lower compared to the same period of 2007 (9M 07 £183m). With-profits bond sales continue to increase strongly, up 186% year on year, reflecting investor appetite for more defensive investment options.

Outlook 

Underlying conditions in retail savings markets are likely to remain challenging over the next 12 months, however we continue to anticipate progress in corporate pension, SIPP and core retail investment business. 

Institutional investment management business

Our institutional investment management business continued its extremely strong sales performance in the first nine months of the year, with £28.3bn of gross new funds under management from new and existing clients. Our core scalable products in index, active fixed income and structured solutions, continue to be attractive to our clients in volatile markets. Total UK assets under management stood at £275bn at the end of September, compared to £286bn at the end of June 2008.

Outlook 

LGIM has delivered average gross sales of £24bn per annum over the last 5 calendar years, excluding institutional unit trust sales. We continue to see opportunities for growth from our traditional product areas, but also through expanding further in structured solutions, active fixed income and active equities, where investment performance continues to progress. 

International business

Sales in our US business were up 6% in local currency terms to $71m, with ongoing growth in our high net worth term life business. In the Netherlands we continued to grow in very challenging industry conditions, with sales up 3% to €30m. We increased share in the unit linked market and delivered strong growth in term life products. Our French business saw sales reduce by 25% to €41m, once again reflecting the absence this year of fiscally-stimulated sales which led to a big one-off increase in sales in 2007.

Financial strength    

At 30 September 2008, Legal & General's estimated surplus capital on the IGD basis remained strong at £2.9bn. This compares to £3.4bn estimated at 30 June 2008. The change primarily reflects the decline in investment markets and the impact of our ongoing share buyback in the period. We have repurchased shares to a value of £111m in the third quarter.

We estimate that in the event of a 30% fall in equity markets from the end of September position, our estimated IGD surplus would reduce to approximately £2bn.

(1)   All sales figures are quoted in APE terms unless otherwise stated (APE = Annual Premium Equivalent = new regular premium plus 10% of new single premium)
(2)    Core retail investment sales
(3)    Management estimate of Insurance Group Directive surplus - a regulatory measure of group capitalisation. 30 June 2008 position was estimated to be £3.4bn
(4)    Bank of England data for the 8 month period to the end of August 2008, compared to the same period of 2007
(5)    Association of British Insurers data

Enquiries

Investors:

Jonathan Maddock    Head of Investor Relations            020 3124 2150
Damian O'Reilly          Investor Relations Manager          020 3124 2151

Ching-Yee Chan        Investor Relations Co-ordinator    020 3124 2345

Media:
John Godfrey            Group Communications Director   020 3124 2090

Richard King              Head of Media Relations               020 3124 2095
Anthony Carlisle        Citigate Dewe Rogerson               07973 611888

Notes

Issued share capital at 30 September 2008 was 5,867,110,348 shares of 2.5p.  

A copy of this announcement can be found in the News and Results section of our shareholder web site at http://investor.legalandgeneral.com/investors/releases.cfm 

Financial calendar:

Event	Date
Full year 2008 new business figures	29 January 2009
2008 Preliminary results	25 March 2009
Q1 2009 Interim management statement	23 April 2009
Half year 2009 results	5 August 2009
9 month 2009 Interim management statement	20 October 2009

Forward-looking statements

This document may contain certain forward-looking statements with respect to certain of Legal & General Group Plc's plans and its current goals and expectations relating to future financial condition, performance and results. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Legal & General Group Plc's control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition and the policies and actions of governmental and regulatory authorities and the timing impact and other uncertainties of future acquisition or combinations within relevant industries. As a result, Legal & General Group Plc's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in Legal & General Group Plc's forward-looking statements. Legal & General Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.

Legal & General Group Plc
Unaudited New Business Premiums
Nine months to 30 September 2008
WORLDWIDE NEW BUSINESS
				Nine months to 30 September 2008						Nine months to 30 September 2007
				Annual		Single		APE		Annual		Single		APE		Increase/
				premiums		premiums				premiums		premiums				(decrease)
										Restated1		Restated1		Restated1
				£m		£m		£m		£m		£m		£m		%
Protection
- Individual				107		-		107		123		-		123		(13%)
- Group				51		-		51		45		-		45		13%
				158		-		158		168		-		168		(6%)
Annuities
- Individual (non profit)				-		578		58		-		724		72		(19%)
- Individual (with-profits)				-		23		2		-		45		5		(60%)
- Bulk purchase				-		1,632		163		-		497		50		226%
				-		2,233		223		-		1,266		127		76%
Total risk				158		2,233		381		168		1,266		295		29%
Non profit savings
- Unit linked bonds				-		1,009		101		-		1,975		198		(49%)
- Individual pensions				137		1,075		245		104		889		193		27%
- DWP rebates				-		8		1		-		4		-		N/A
With-profits savings
- Bonds				-		198		20		-		70		7		186%
- Individual pensions				81		369		118		101		581		159		(26%)
- DWP rebates				-		113		11		-		112		11		0%
- Group pensions				2		3		2		6		3		6		(67%)
Total life and pensions savings				220		2,775		498		211		3,634		574		(13%)
Core retail investments1
- Unit trusts				8		1,042		112		5		700		75		49%
- ISAs				23		327		56		11		383		49		14%
				31		1,369		168		16		1,083		124		35%
Total savings				251		4,144		666		227		4,717		698		(5%)
Total UK risk and savings new business				409		6,377		1,047		395		5,983		993		5%
- USA				36		-		36		34		-		34		6%
- Netherlands				10		128		23		8		121		20		15%
- France				15		126		27		16		201		36		(25%)
				61		254		86		58		322		90		(4%)
France retail investment business				-		44		4		-		20		2		100%
Total international new business				61		298		90		58		342		92		(2%)
Total worldwide new business				470		6,675		1,137		453		6,325		1,085		5%
1. Total UK core retail investments excludes institutional investments in unit trust funds which are disclosed as part of institutional fund management new business (see Investment Management below). 2007 has been restated to reflect this change.
Legal & General Group Plc
Unaudited New Business Premiums
Nine months to 30 September 2008
WORLDWIDE NEW BUSINESS APE QUARTERLY PROGRESSION
				3 months to		3 months to		3 months to		3 months to		3 months to		3 months to		3 months to
				30.09.08		30.06.08		31.03.08		31.12.07		30.09.07		30.06.07		31.03.07
										Restated1		Restated1		Restated1		Restated1
				£m		£m		£m		£m		£m		£m		£m
Protection
- Individual				34		37		36		37		41		40		42
- Group				14		23		14		18		16		15		14
				48		60		50		55		57		55		56
Annuities
- Individual (non profit)				20		20		18		16		24		23		25
- Individual (with-profits)				-		1		1		-		2		1		2
- Bulk purchase				25		66		72		62		12		21		17
				45		87		91		78		38		45		44
Total risk				93		147		141		133		95		100		100
Non profit savings
- Unit linked bonds				26		35		40		53		62		62		74
- Individual pensions				83		93		69		60		60		64		69
- DWP rebates				1		-		-		-		-		-		-
With-profits savings
- Bonds				9		7		4		3		2		2		3
- Individual pensions				33		47		38		40		48		56		55
- DWP rebates				4		6		1		1		4		6		1
- Group pensions				1		1		-		1		-		5		1
Total life and pensions savings				157		189		152		158		176		195		203
Core retail investments1
- Unit trusts				37		45		30		28		26		26		22
- ISAs				16		28		12		9		12		25		13
				53		73		42		37		38		51		35
Total savings				210		262		194		195		214		246		238
Total UK risk and savings new business				303		409		335		328		309		346		338
- USA				12		12		12		11		12		11		11
- Netherlands				6		8		9		7		6		6		8
- France				8		4		15		6		9		17		10
				26		24		36		24		27		34		29
France retail investment business				2		1		1		-		-		1		1
Total international new business				28		25		37		24		27		35		30
Total worldwide new business				331		434		372		352		336		381		368
1. Total UK core retail investments excludes institutional investments in unit trust funds which are disclosed as part of institutional fund management new business (see Investment Management below). 2007 has been restated to reflect this change.
Legal & General Group Plc
Unaudited New Business Premiums
Nine months to 30 September 2008
INVESTMENT MANAGEMENT
											Nine months to 30 September					Increase/
												2008		2007		(decrease)
														Restated1
												£m		£m		%
Managed pension funds
- Pooled funds												23,310		29,557		(21%)
- Segregated funds												411		2,373		(83%)
												23,721		31,930		(26%)
Other funds1												4,627		1,497		209%
Total new funds												28,348		33,427		(15%)
Attributable to:
Legal & General Investment Management												26,688		32,375		(18%)
Legal & General Retail Investments												1,660		1,052		58%
INVESTMENT MANAGEMENT QUARTERLY PROGRESSION
				3 months to		3 months to		3 months to		3 months to		3 months to		3 months to		3 months to
				30.09.08		30.06.08		31.03.08		31.12.07		30.09.07		30.06.07		31.03.07
										Restated1		Restated1		Restated1		Restated1
				£m		£m		£m		£m		£m		£m		£m
Managed pension funds
- Pooled funds				9,748		8,254		5,308		19,903		13,989		10,646		4,922
- Segregated funds				47		141		223		230		1,925		380		68
				9,795		8,395		5,531		20,133		15,914		11,026		4,990
Other funds1				908		3,151		568		871		492		506		499
Total new funds				10,703		11,546		6,099		21,004		16,406		11,532		5,489
Attributable to:
Legal & General Investment Management				10,464		10,611		5,613		20,247		16,149		11,167		5,059
Legal & General Retail Investments				239		935		486		757		257		365		430
1. Other funds includes institutional investments in unit trust funds managed by Legal & General Retail Investments which were previously disclosed as UK core retail investments APE. 2007 has been restated to reflect this change.
INTERNATIONAL OPERATIONS IN LOCAL CURRENCY
				Nine months to 30 September 2008						Nine months to 30 September 2007						Increase/
				Annual		Single		APE		Annual		Single		APE		(decrease)
				premiums		premiums				premiums		premiums				%
USA ($m):				71		-		71		67		-		67		6%
Netherlands (€m):				13		165		30		11		178		29		3%
France (€m):
	- Life and pensions			19		162		35		23		297		53		(34%)
	- Unit trusts			-		56		6		-		21		2		200%
UK INDIVIDUAL APE BY CHANNEL
										Nine months to 30 September 2008
										Annual		Single		Total APE		% of
										£m		£m		£m		total
Independent financial advisers										261		3,585		620		75%
Tied										81		1,051		186		22%
Direct										14		106		25		3%
Total										356		4,742		831		100%
										Nine months to 30 September 2007
										Annual		Single		Total APE		% of
										Restated1		Restated1		Restated1		total
										£m		£m		£m		Restated1
Independent financial advisers										252		4,053		657		74%
Tied										76		1,279		204		23%
Direct										16		151		31		3%
Total										344		5,483		892		100%
1. Total UK core retail investments excludes institutional investments in unit trust funds which are disclosed as part of institutional fund management new business (see Investment Management above). 2007 has been restated to reflect this change.

 

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