L&G new business falls 23 per cent

3 November 2009 8:37 am | By Helen Pow

The firm’s protection sales were down 16 per cent from  £158m to £133m over the period on an annual premium equivilent basis.

L&G saw a 35 per cent rise in sales of individual annuities but this was offset by a 52 per cent decline in the value of pensions buyout new business.

The firm says the buy-out market was subdued by increased pensions deficits and the higher cost to execute transactions.

Sales of non-profit savings products fell 26 per cent to £258m over the period. L&G says this is a result of managerial actions to reduce sales of old-style savings products and increase sales of capital light products such as Sipps.

Individual Sipp sales grew by 8 per cent in the year to September and now represent 72 per cent of all L&G non-profit individual pension sales. Total APE sales of pensions were 13 per cent lower at £212m compared with £245m the previous year.

Sales of with-profits bonds were strong rising 120 per cent from £20m to £44m over the period. LGIM recorded assets under management of £311bn and net inflows of £12.2bn in the year to date.

L&G says changes made to its distribution channel mix over the past 12 months in advance of the Retail Distribution Review have seen the sales of risk and savings new business through IFAs fall from 75 per cent of total APE in the first nine months of 2008 to 65 per cent in the same period in 2009.

Over the same period, sales through the tied and direct channels have increased to 27 per cent and 8 per cent respectively.

At the end of September 2009, L&G’s estimated capital surplus was £2.5bn.

This represents an increase from £1.9bn at the end of June reflecting the benefit of £300m lower tier 2 debt raised in July.

Group chief executive Tim Breedon says: “In March I set out our intention to accelerate the net cash generation of the Group. We set targets to deliver £450m of net cash and £50m of annualised cost savings in 2009. We have already exceeded both these targets.

“In the first nine months of 2009, new business sales were good. LGIM continues to receive strong new business flows and has £311bn of funds under management.

“Protection sales, down 16 per cent, have proved resilient to a weakened UK housing market. Reduced pensions buyout scheme tenders and increased competition in recent months have limited attractive pensions buyout opportunities, although individual annuity sales are up 35 per cent.

“In Savings we have continued our move towards Sipps and Unit Trusts. Total savings sales are up 1 per cent year on year. International sales are 2 per cent ahead with trading in India on schedule to commence in November.

“Confidence is slowly returning to the economy. We see modest recovery in the UK going forward. The actions we have taken this year mean that our businesses are well placed to capitalise on future market growth and continue to deliver strong net cash generation.”

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