Legal & General’s operating profit rose 14 per cent in 2015 led by a steep increase in profits from the retirement business.
According to the insurer’s full year results, published today, the retirement division saw profits rise 49 per cent year-on-year, from £428m to £639m in 2015.
Overall group profit rose 14 per cent, to £1.5bn.
Retirement profits were up despite a stark fall in sales of both individual and bulk annuities during the year.
Individual annuity sales dropped 45 per cent to £327m, while bulk annuity premiums fell 60 per cent, from £6bn to £2.4bn.
However the fall is distorted by the internal transfer of £2bn annuities from the with-profits business in 2014.
L&G says profits were boosted by £18m as a result of a higher than expected number of annuitants dying. It also banked £97m after changing reserves held based on how long customers defer taking their pension.
L&G’s platform Cofunds – which Money Marketing revealed is subject to bids from Aegon and Bravura/Capita – saw inflows fall by £1.9bn to £3.5bn.
Around 22,000 or 90 per cent of customers have taken cash payments since the pension reforms, compared to 60 per cent previously.
The firm says its annuity back book “should be able to generate strong levels of profit for many years”.
Lifetime mortgage advances were £201m following L&G’s entry into the equity release market with the acquisition of Newlife Home Finance. The firm aims to write up to £500m of new business in 2016.
Group chief executive Nigel Wilson says: “We had already moved to a capital-lite model for UK pension risk transfer business in anticipation of the new Solvency II regime and we will use our Solvency II surplus capital of £5.5bn to continue to deliver on our strategy.
“We have a robust business model which has proved to be adept and resilient in dealing with fiscal and regulatory changes in our sector. We are planning for more global economic and market volatility and are well positioned for continued pressure on pricing and changes in product mix in our industry.”