L&G Profit Jumps as CEO Targets Mortgages to Offset Annuities

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Legal & General Group Plc reported profit that topped analyst estimates as the insurer doubled a target for its lifetime mortgage business to help offset a slump in annuity sales.

The largest manager of U.K. pension assets increased first-half operating profit 18 percent to 750 million pounds ($1.2 billion), according to a statement Wednesday. That beat the 692 million-pound average estimate of 17 analysts provided by the company. The interim dividend rose 19 percent to 3.45 pence per share, which also exceeded forecasts.

L&G said it expects to approve 200 million pounds of lifetime mortgages this year, up from a previous goal of 100 million pounds, after buying NewLife Home Finance in April. The loans are secured on property and repayment isn’t made until death or the borrower goes into long-term care.

“Our entry into lifetime mortgages has been more successful than I had anticipated,” Chief Executive Officer Nigel Wilson said on a conference call. “These are great markets to be in and more and more people want to access their capital. About 1.3 trillion pounds of equity is tied up in housing for the over 60s.”

Sales of bulk annuities fell to 1.15 billion pounds from 3.14 billion pounds a year earlier, L&G said. Individual annuity sales dropped to 180 million pounds from 383 million pounds. U.K. government changes to retirement in 2014 have sent sales of individual annuities tumbling. Further declines are expected, it added.

The stock jumped as much as 4.8 percent in London trading and rose 2.5 percent to 270.1 pence at 1:36 p.m., extending gains this year to 8.7 percent.

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Elsewhere, L&G’s investment unit reported a 62 percent jump in net inflows to 13.8 billion pounds, boosting by flows across the U.S. and Asia. Wilson said the company is also looking to enter new markets including Australia and South Africa in the next 18 months. Group assets under management rose 12 percent to 714.6 billion pounds.

L&G has been selling off non-core assets as it looks to cut costs by 80 million pounds in 2015. The company is in exclusive talks to sell its French unit to Apicil Prevoyance and has also disposed of its stake in an Egyptian life insurer and L&G International in Ireland.

The insurer’s other international businesses include a joint venture in India, which Wilson said Wednesday remains an “important strategic investment,” and operations in the Netherlands, which he declined to comment on.

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