Legal & General is to move to a more conservative mortality basis for reserving and reporting on its annuity business which it says will improve its reserves by around £100m.
The company says this will not lead to lower annuity rates although advisers warn that more mortality reserving will put downward pressure on rates.
Group chief executive David Prosser says: “The board has decided to move to a more conservative mortality basis for reporting on annuity business which will result in a net increase in reserves of less than £100m.”
Pensions Associates Limited director Glyn Isden says: “I am not surprised they are having a close look at their book because they are such a massive player. This will put downward pressure on rates in terms of mortality although I see more pressure for improvements in rates because long-term interest rates look likely to rise.”
L&G says it has seen a marked increase in UK new business growth, with business volumes in the second quarter of this year more than 20 per cent up on both the first quarter of the year and the second quarter of last year.
Sales of unit-linked bonds reflect consumers' continuing to switch away from with-profits bonds while term insurance volumes have remained high.
The firm believes the improved figures show a return of consumer confidence.