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L&G profits boosted by LGIM and Cofunds inflows

Legal & General has posted a 10 per cent increase in pre-tax profit for 2013 from £1.03bn to £1.13bn, driven by £17bn net inflows across its investment arm and the Cofunds platform.

Legal & General Investment Management made an operating profit of £304m, up 12 per cent from £272m in 2012.

Assets under management at LGIM went from £406bn to £449.5m as at 31 December 2013, with net inflows of £9.3bn, up 75 per cent from £5.3bn the previous year. International business drove record net inflows of £15.7bn, but this was offset by UK net outflows of £6.4bn, including pension payments from defined benefit funds.

Cofunds, which L&G acquired in May, saw net inflows in 2013 of £7.9bn from the time of the acquisition, taking total AUA on the platform to £64.1bn. Cofunds is expected to report full-year net inflows of £10.1bn later this month.

L&G’s retirement business reported a 10 per cent increase in operating profit from £281m to £310m.

Annuity business is up 78 per cent from £2.3bn to £4.1bn. Bulk annuity business jumped 180 per cent from £1bn to £2.8bn, but individual annuity sales were flat at £1.3bn, which L&G attributes to pensioners deferring retirement, the introduction of gender neutral pricing, and the RDR.

L&G says three quarters of its individual annuity sales came from external sources.

L&G Assurance Society, which includes the insurer’s protection and savings businesses, saw a 4 per cent fall in operating profit from £462m to £444m. Protection sales remained broadly flat, going from £221, in 2012 to £218m last year.

The workplace business saw losses double from £14m to £29m, which L&G says is due to “the costs and continued investment associated with securing 500,000 new auto-enrolees outweighed the low early years’ revenue.”

L&G Network, the company’s mortgage club, arranged £28bn of mortgages, around one in six UK mortgages.

L&G group chief executive Nigel Wilson says:
 “Disciplined investment in growth, effective management and rigorous cost control has enabled us to more than triple net cash since the financial crisis. We have grown dividends again by over 20 per cent and due to the strength of the business intend to move dividend cover from 1.8 towards 1.5 times over the next two years.

“L&G moved up another gear in 2013, delivering record financial results and accelerating growth across all areas. Net inflows were £17bn including £9bn in LGIM and £8bn into Cofunds. LGIM now has £450bn of AUM, and Cofunds, with £64bn of assets is the UK’s largest savings platform. 

“We have delivered significant outperformance during lean economic times and are building momentum as the economy recovers.”

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