Legal & General is predicting its individual annuity sales will fall by half again this year on top of the 54 per cent slump in sales seen last year.
The pension freedoms reforms have resulted in a fall in L&G’s individual annuity sales from £1.3bn in 2013 to £591m in 2014.
In its results, published today, the insurer says: “We continue to expect the market to remain subdued in 2015, anticipating volumes to be down a further 50 per cent in 2015. We are focused on maintaining pricing discipline during this period of change.”
But total annuity business volumes have doubled over the year from around £4.1bn to £8.5bn, driven by a 112 per cent rise in bulk annuity sales from £2.8bn to just under £6bn. L&G’s total annuity business was also boosted an internal £2bn in annuities transferred from its with-profits business to its shareholder fund in July.
Total assets under management at L&G Investment Management went from £449.5bn to £499.1bn. But the insurer’s asset management arm was hit by a massive 63 per cent drop in net asset flows from £20.3bn to £7.6bn. Net outflows saw a dramatic rise from £200m to £16bn, as defined benefits passive funds sought to de-risk.
New business premiums for UK protection rose 6 per cent from £218m to £230m, with retail protection sales up 11 per cent from £148m to £165m.
Overall L&G posted an 8 per cent increase in pre-tax profit from £1.1bn to £1.24bn.
L&G group chief executive Nigel Wilson says: “The five global macro trends driving our strategy – ageing populations, globalisation of asset markets, welfare reform, digital connectivity and bank retrenchment – create long-term growth opportunities, which we position our businesses to capture.
“The rapid growth of LGIM’s international business to over £100bn, the £5bn of investment in physical assets in the UK, and our entrance into the lifetime mortgage market are all examples of the successful execution of our strategy.”