Q4 New Business Figures

RNS Number : 4234M

Legal & General Group Plc

29 January 2009

 



Legal & General Group New Business Figures

Stock Exchange Release  

29 January 2009

New business sales up 3% year on year

Capital and cashflow remain robust

Highlights for the 12 months to 31 December 2008 ⁽¹⁾:

Worldwide new business £1,486m (FY 07: £1,437m)             up 3%

UK new business £1,367m (FY 07: £1,321m)                            up 3%

Q4 new business 6% ahead of Q3 

UK Risk: new business £488m (FY 07: £428m)                        up 14% 

Bulk purchase annuities grow strongly                                      up 73%

Group protection continues to grow                                           up 6%

UK Savings: new business £879m (FY 07: £893m)                 down 2%

Unit trust and ISA sales⁽²⁾ remain strong                                   up 42%

Non profit pension growth boosted by SIPP sales                     up 30%

Unit linked bond sales remain lower as anticipated                    down 48%

Investment Management gross new funds £33.1bn (FY 07: £54.4bn)

2007 gross new funds were £34.1bn excluding business transferred from clients of Hermes

Robust capital and cashflow position

Tim Breedon, Group Chief Executive, said: 

'Our sales performance has been good in a tough environment. In Q4 we have increased Risk and Savings sales compared to Q3, and attracted £5bn of gross inflows into Investment Management.

'In our Risk business we have moved our protection products further away from housing related business and delivered strong, diversified annuity sales. Our reputation, products and client service offering have continued to attract customers to our Savings and Investment Management businesses. 

'Legal & General's capital and cashflow position remains robust, and our significant surplus gives confidence to our customers, underpins returns to investors, and enables us to build the business even through volatile markets.

'The challenges of recent months look set to continue in 2009 - but there will be opportunities for growth. We have the confidence to continue to grow and develop our business profitably and invest for the future.'

New 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 £1,367m, an increase of 3% on 2007.  Worldwide APE new business was £1,486m, also up 3%. Our institutional investment management business added £33.1bn of gross new funds during 2008.

UK Risk business

Protection: 7% lower at £207m (FY 07: £223m)

Individual protection sales of £140m (FY 07: £160m) were 13% lower, comparing favourably to the 39% fall in mortgage approvals⁽³⁾ in 2008.  The proportion of products not associated with a mortgage grew, including family protection, business protection and high sum assured business, as we continued to diversify away from mortgage related sales.  We also benefited through the year from new sales through our major distribution relationship with Nationwide Building Society.

Group protection sales rose 6% to £67m (FY 07: £63m) as employers continued to seek competitive and attractive benefits for their employees. Customers are shifting their emphasis to focus more on benefit design to give them and their employees greater flexibility and value for money. We continue to build on our leading product and service proposition, positioning us well in this dynamic market.

Annuities: up 37% to £281m (FY 07: £205m)

Bulk Purchase Annuity (BPA) sales increased by 73% to £194m (FY 07: £112m), reflecting a step change in demand.  New business was made up of 194 separate policies with an average single premium case size of £10m, helping to further diversify our business. In Q4 we have signed only one scheme in excess of £100m single premium, reflecting our cautious approach to pricing larger schemes due to volatility in credit markets. Sales in Q4 were £31m, £6m higher than Q3 (£25m), achieved in conditions of improving interest margins.

Sales of individual annuities of £87m were 6% lower than last year (FY 07: £93m), but Q4 sales of £27m were the highest since the start of 2007. We continue to balance our appetite between bulk and individual annuity markets. In the early part of the year we reduced our activity in the individual market reflecting in part our focus on the significant opportunities in the BPA market. In Q4 we stepped up our sales initiatives as the interest margin for individual annuities improved.

UK Savings business

Unit linked bonds: 48% lower at £131m (FY 07: £251m)

The decline in sales was in line with recent trends. The major driver of this reduction remains the impact of industry volumes, which have fallen materially after changes to Capital Gains Tax announced towards the end of 2007. Some customers have also reduced their appetite for unit linked investments in a period of market volatility.

Non profit pensions: up 30% to £328m (FY 07: £253m).

We continued to refocus our non profit pension business towards more modern, flexible, transparent and less capital intensive products. This includes SIPPs, which accounted for 57% of individual non profit pensions and 15% of corporate non profit pensions. The acquisition of Suffolk Life early in 2008 further expanded our strong SIPP franchise and added to the growth we saw in our other pensions products.

With-profits savings: 16% lower at £191m (FY 07: £228m).

Investors' appetite for products with more defensive investment characteristics continues to be seen in the with-profits bond market, where we saw sales increase from £10m to £28m.

Retail investments: up 42% to £229m (FY 07: £161m) 

In a challenging environment for the wider retail investment industry, our products continued to resonate with our customers, and our sales have benefited as a result. Underlying sales increased year on year, further boosted by our distribution agreement with Nationwide Building Society.

Institutional investment management business

In 2008 gross new funds under management from new and existing clients amounted to £33.1bn (FY 07: £54.4bn including one off transfers of £20.3bn from clients of Hermes). Our core product and service offering continues to appeal to customers, who appreciate our value for money investment propositions combined with low risk of performance disappointment and reputation for excellent client service. Gross sales were significantly ahead of our long-term average of £18bn per annum over the last 10 years.

International businesses

In local currency, our US business sales were 4% higher year on year at $94m (FY 07: $90m), with continued growth in high net worth term life business.

In France investment market volatility and the absence in 2008 of the fiscally-stimulated sales seen in 2007 were reflected in total sales being 21% lower at €50m (FY 07: €63m).

Sales in the Netherlands of €36m were 5% lower (FY 07: €38m) due to a 13% drop in single premium business in challenging industry conditions. 

Total overseas sales on a sterling basis were 3% higher at  £119m (FY 07: £116m), benefiting from the appreciation of the Euro and US dollar over the year.

Balance sheet 

As at 30 September 2008 we estimated our IGD surplus position to be £2.9bn. At that point the FTSE 100 index stood at 4,902, and we indicated significant resilience to further investment market volatility, estimating that a 30% equity market reduction would reduce this to c£2bn. At 31 December 2008 the FTSE 100 index stood at 4,434, approximately 10% lower.

The final IGD position as at 31 December 2008 will be provided with our preliminary results in March. This will reflect market movements over the fourth quarter, any impact of our normal year-end reserving review and the Board's recommendation on final dividend.

Relative financial strength remains, in our view, a key strategic differentiator of Legal & General in the sector and a core part of our balance sheet management philosophy.

(1)  All new business 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)  Bank of England data for the 11 month period to the end of November 2008, compared to the same period of 2007

Supplementary reporting 

For the 2008 year end we will continue to produce EEV supplementary information to cover our UK and overseas life and pensions businesses. However we do not believe it is appropriate for our managed pension fund business within LGIM to be included as part of the covered business. As a result all of our Investment Management businesses will now be reported on the IFRS basis, though some EEV information will still be made available.

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
James Bradley	Tulchan Communications	020 7353 4200

Notes

Issued share capital at 31 December 2008 was 5,861,627,994 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://www.legalandgeneralgroup.com/investors/results.cfm 

Financial calendar:

2008 Preliminary results	25 March 2009
Q1 2009 Interim management statement	23 April 2009
Half year 2009 results	4 August 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
Twelve months to 31 December 2008
WORLDWIDE NEW BUSINESS
				Twelve months to 31 December 2008						Twelve months to 31 December 2007
				Annual		Single		APE		Annual		Single		APE		Increase/
				premiums		premiums				premiums		premiums				(decrease)
				£m		£m		£m		£m		£m		£m		%
Protection
- Individual				140		-		140		160		-		160		(13%)
- Group				67		-		67		63		-		63		6%
				207		-		207		223		-		223		(7%)
Annuities
- Individual (non profit)				-		841		84		-		875		88		(5%)
- Individual (with-profits)				-		27		3		-		47		5		(40%)
- Bulk purchase				-		1,938		194		-		1,123		112		73%
				-		2,806		281		-		2,045		205		37%
Total risk				207		2,806		488		223		2,045		428		14%
Non profit savings
- Unit linked bonds				-		1,306		131		-		2,512		251		(48%)
- Individual pensions				181		1,460		327		141		1,118		253		29%
- DWP rebates				-		8		1		-		4		-		N/A
With-profits savings
- Bonds				-		283		28		-		102		10		180%
- Individual pensions				106		434		149		124		752		199		(25%)
- DWP rebates				-		118		12		-		124		12		0%
- Group pensions				2		3		2		6		5		7		(71%)
Total life and pensions savings				289		3,612		650		271		4,617		732		(11%)
Core retail investments1
- Unit trusts				12		1,466		159		7		962		103		54%
- ISAs				29		413		70		14		437		58		21%
				41		1,879		229		21		1,399		161		42%
Total savings				330		5,491		879		292		6,016		893		(2%)
Total UK risk and savings new business				537		8,297		1,367		515		8,061		1,321		3%
- USA				51		-		51		45		-		45		13%
- Netherlands				13		157		29		11		156		27		7%
- France				17		164		33		17		248		42		(21%)
				81		321		113		73		404		114		(1%)
France retail investment business				-		63		6		-		24		2		200%
Total international new business				81		384		119		73		428		116		3%
Total worldwide new business				618		8,681		1,486		588		8,489		1,437		3%
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).
Legal & General Group Plc
Unaudited New Business Premiums
Twelve months to 31 December 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		3 months to
		31.12.08		30.09.08		30.06.08		31.03.08		31.12.07		30.09.07		30.06.07		31.03.07
		£m		£m		£m		£m		£m		£m		£m		£m
Protection
- Individual		33		34		37		36		37		41		40		42
- Group		16		14		23		14		18		16		15		14
		49		48		60		50		55		57		55		56
Annuities
- Individual (non profit)		26		20		20		18		16		24		23		25
- Individual (with-profits)		1		-		1		1		-		2		1		2
- Bulk purchase		31		25		66		72		62		12		21		17
		58		45		87		91		78		38		45		44
Total risk		107		93		147		141		133		95		100		100
Non profit savings
- Unit linked bonds		30		26		35		40		53		62		62		74
- Individual pensions		82		83		93		69		60		60		64		69
- DWP rebates		-		1		-		-		-		-		-		-
With-profits savings
- Bonds		8		9		7		4		3		2		2		3
- Individual pensions		31		33		47		38		40		48		56		55
- DWP rebates		1		4		6		1		1		4		6		1
- Group pensions		-		1		1		-		1		-		5		1
Total life and pensions savings		152		157		189		152		158		176		195		203
Core retail investments1
- Unit trusts		47		37		45		30		28		26		26		22
- ISAs		14		16		28		12		9		12		25		13
		61		53		73		42		37		38		51		35
Total savings		213		210		262		194		195		214		246		238
Total UK risk and savings new business		320		303		409		335		328		309		346		338
- USA		15		12		12		12		11		12		11		11
- Netherlands		6		6		8		9		7		6		6		8
- France		6		8		4		15		6		9		17		10
		27		26		24		36		24		27		34		29
France retail investment business		2		2		1		1		-		-		1		1
Total international new business		29		28		25		37		24		27		35		30
Total worldwide new business		349		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).
Legal & General Group Plc
Unaudited New Business Premiums
Twelve months to 31 December 2008
INVESTMENT MANAGEMENT
											Twelve months to 31 December					Increase/
												2008		2007		(decrease)
												£m		£m		%
Managed pension funds
- Pooled funds												26,733		49,460		(46%)
- Segregated funds												841		2,603		(68%)
												27,574		52,063		(47%)
Other funds1												5,517		2,368		133%
Total new funds												33,091		54,431		(39%)
Attributable to:
Legal & General Investment Management												30,873		52,622		(41%)
Legal & General Retail Investments												2,218		1,809		23%
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		3 months to
		31.12.08		30.09.08		30.06.08		31.03.08		31.12.07		30.09.07		30.06.07		31.03.07
		£m		£m		£m		£m		£m		£m		£m		£m
Managed pension funds
- Pooled funds		3,423		9,748		8,254		5,308		19,903		13,989		10,646		4,922
- Segregated funds		430		47		141		223		230		1,925		380		68
		3,853		9,795		8,395		5,531		20,133		15,914		11,026		4,990
Other funds1		890		908		3,151		568		871		492		506		499
Total new funds		4,743		10,703		11,546		6,099		21,004		16,406		11,532		5,489
Attributable to:
Legal & General Investment Management		4,185		10,464		10,611		5,613		20,247		16,149		11,167		5,059
Legal & General Retail Investments		558		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.
INTERNATIONAL OPERATIONS IN LOCAL CURRENCY
				Twelve months to 31 December 2008						Twelve months to 31 December 2007						Increase/
				Annual		Single		APE		Annual		Single		APE		(decrease)
				premiums		premiums				premiums		premiums				%
USA ($m):				94		-		94		90		-		90		4%
Netherlands (€m):				16		199		36		15		228		38		(5%)
France (€m):
	- Life and pensions			21		206		42		24		364		60		(30%)
	- Unit trusts			-		79		8		-		29		3		167%
UK INDIVIDUAL APE BY CHANNEL
										Twelve months to 31 December 2008
										Annual		Single		Total APE		% of
										£m		£m		£m		total
Independent financial advisers										345		4,819		827		75%
Tied										104		1,388		243		22%
Direct										19		149		34		3%
Total										468		6,356		1,104		100%
										Twelve months to 31 December 2007
										Annual		Single		Total APE		% of
										£m		£m		£m		total
Independent financial advisers										324		5,175		842		74%
Tied										102		1,596		261		23%
Direct										20		167		36		3%
Total										446		6,938		1,139		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).

 

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