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L&G profits boosted by annuity, mortgage and int’l investment sales

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Annuity, mortgage and international investment sales helped Legal & General increase pre-tax profits 13 per cent, from £523m to £592m, in the first half of the year.

Operating profits for its investment arm, Legal & General Investment Management, were up 13 per cent, from £119m to £135m, with net flows up 100 per cent, from £4bn to £8bn. However, UK net flows were down 69 per cent, from £1.6bn to 500m, with international net inflows up over 200 per cent, from 2.4bn to 7.5bn.

Annuity business was up 9 per cent, from £139m to £151m, with growth in both bulk and individual annuities.

L&G says its July acquisition of Lucida, a closed-book buy-out company, should boost future returns in this area. In the individual space it says it has positioned itself for increased shopping around, with sales of external business now 79 per cent of total premiums, up from 73 per cent the previous year.

Housing and protection operating profits increased 12 per cent, from £150m to £168m, although retail protection sales dropped 10 per cent, from £72m to £65m, as business was brought forward into the last quarter of 2012 to secure better rates before gender neutral pricing.

L&G’s mortgage network advised on £11bn of lending during the period, up 22 per cent on the £9bn the previous year.

The provider’s savings business, which includes the newly purchased Cofunds platform, saw a 14 per cent fall in operating profits, from £72m to £62m.

Unit trust sales fell under L&G’s savings arm for the last time in these results and in future will appear as part of LGIM. Sales of passive funds increased 65 per cent to £1.2bn and the provider expects growth of between 10 and 20 per cent each year over the next five years. Total unit trust sales increased 42 per cent, from £1.2bn to £1.7bn.

Workplace savings saw sales up 94 per cent, from £170m to £329m with £7.3bn now on L&G’s workplace platform, compared to £6bn the previous year. Auto enrolment rates are currently less than 10 per cent. Suffolk Life Sipp business saw sales increase 25 per cent to £50m APE.

L&G has increased its interim dividend 22 per cent, from 1.96p to 2.4p a share.

Group chief executive Nigel Wilson says: “We are successfully evolving our strategy from a post-financial crisis focus on cash, to one based on cash plus growth plus selective acquisitions. 

“It is based on five macro-trends: increasingly global asset markets, ageing populations, digital lifestyles, welfare reform and bank retrenchment.  In each case, we have accelerated growth: by expanding international investment management, providing retirement solutions, growing our digital presence, increasing private protection, and direct investments.” 

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