L&G New Business Result Q4/00
Legal & General Group PLC
23 January 2001
Legal & General Group Plc
2000 New Business Results
- £16 billion new business placed with Legal & General Group for savings
and protection - the largest amount for any UK insurer
- Strategic alliance with Barclays PLC enhances growth prospects
New life and pensions business EPI*
UK individual £369m +11%
UK corporate £73m -26%
International £90m +7%
Worldwide £532m +4%
ISA and unit trust EPI £98m -14%
Worldwide funds under management £114bn
New investment management business £12.7bn
* Equivalent premium income (EPI) comprises new annual premiums + 10%
of single premiums.
Group Chief Executive, David Prosser, said: 'In 2000 Legal & General
again increased market share, achieving 11% growth in new business in our
core UK individual life and pensions business.
'Our fund management business won £12.7bn of new funds from institutional
investors, reinforcing our position as one of the UK's most successful
investment management companies.
'In addition to these achievements, our distribution capability has now
been significantly enhanced by the strategic alliance with Barclays. We
are confident that our consistently good value products and our good
service will continue to attract the support of business partners, agents
and customers.'
UK NEW BUSINESS
===============
New individual life and pensions business continued the growth pattern of
recent years, increasing by 11% to £369m EPI (1999: £331m). In the final
quarter of the year new individual life and pension business also grew by
11% over the corresponding period of 1999. This should represent a
further increase in our market share since we believe market new business
volumes have declined marginally over 2000. Group business fell as a
result of lower volumes of bulk purchase annuity business. Unit trust
and ISA volumes over 2000 were also lower than in the previous year.
However, we are encouraged by the 14% growth in new business EPI in the
final quarter following the launch of four new funds. In aggregate, new
business for the year was £536m EPI, little changed from the 1999 level
of £541m.
Individual Pensions
-------------------
During 2000, the market has positioned itself in anticipation of the
April launch of Stakeholder pensions. Legal & General has operated
largely in the fee-based and low commission segments of the pensions
intermediary market. Support from these intermediaries for our
Stakeholder look-alike products helped our new individual pension
business to grow by 16% to £165m EPI (1999: £142m).
In 2001 we anticipate some initial market disturbance as employers first
wait for and then react to the key Stakeholder dates in April and October.
We expect scheme population to move ahead in the latter part of the year.
Sales of annuity business grew substantially in 2000, with fourth quarter
sales up 26% on the previous year. In this important market sector, 40%
growth was achieved over the year, with sales reaching £426m (1999:
£304m).
Individual Life
---------------
Legal & General's strengths in the housing market led to a 5% increase in
annual premiums from term and ISA business related to mortgages (2000:
£112m; 1999: £107m). However, our new business also reflected an
increasing trend towards repayment mortgages. Term assurance from this
segment rose by 47% to £25m (1999: £17m). This significant overall growth
in new business once again reflected the success of our Mortgage Club
panel of lenders, which saw completed loans increase by 53% to £5.1bn.
An important initiative in the latter part of the year was the launch of
our e-term product, which allows IFAs and direct customers to apply for
term assurance on-line. Applications can be underwritten on-line,
permitting end to end electronic processing and thereby improving the
speed, efficiency and cost-effectiveness of our business.
Single premium bond sales totalled £751m in 2000, an increase of 18%
(1999: £634m). Demand for our with-profits bonds from both IFAs and our
major business partners was particularly buoyant, increasing 45% over the
year to £648m (1999: £448m). Sales accelerated in the second half of the
year, averaging over £63m each month.
Unit trusts and ISAs
--------------------
Early in 2000, Legal & General expressed the view that technology stocks
were overpriced. As a consequence, we did not offer a technology fund at
that time despite the then high levels of market demand. Although our
first quarter market share was depressed as a consequence, new business
has subsequently recovered with fourth quarter EPI at £25m 14% ahead of
the corresponding period last year. The launch of both additional
specialist tracking funds and new actively managed funds helped single
payment ISA and unit trust sales reach a record fourth quarter volume of
£120m.
Legal & General's market leading position in retail index tracking ISA's
helped new regular contributions to grow by 17% during the year to £27m.
With steadily improving functionality now allowing customers both to
purchase on-line and to switch between funds on-line, we see the ISA and
unit trust market as a growth segment for our business. Total external
unit trust and ISA assets under management now amount to £3.9bn (1999:
£3.5bn).
Distribution
------------
Multi-channel distribution is a key component in Legal & General's growth
strategy. This provides the greatest access to potential customers and
embraces our business partners, IFAs and direct sales to customers
through our call centre, the Internet and 'off the page'. Each of these
channels is making increasing use of e-commerce opportunities to enhance
customer service and to drive down costs. In a more challenging market,
volume growth has been achieved in both the Direct and IFA channels,
although growth continues to be strongest in the IFA channel, with
individual new business up by 11% over the year.
The FSA is currently consulting on proposed changes to the existing
polarisation regime. The proposals permit 'multi-ties' for some products.
Given Legal & General's experience in successfully managing multiple
distribution channels, we believe the proposals, if adopted, will play
to the Group's strengths.
Strategic alliance with Barclays PLC
------------------------------------
Looking ahead, volumes from our business partners will be significantly
enhanced by the recently announced strategic alliance with Barclays.
Initially, this important new alliance will focus on Stakeholder pensions
but, subject to final FSA confirmation, it will be extended later
this year to include Legal & General's full range of life, pensions and
savings products. The alliance is expected to increase Legal & General's
UK equivalent premium income by over 25% in the first full year of
operation.
Group life and pensions
-----------------------
A major component of this market is bulk purchase annuity business where
year on year comparisons are affected by the relatively low volumes which
have been placed in the market this year pending the outcome of an appeal
case regarding the equalisation of Guaranteed Minimum Pension rights.
That judgement is now imminent. In the more subdued market prevailing in
2000, Legal & General continued to win a significant share of the schemes
placed.
Group risk continued its strong performance with new business totalling
£31m EPI over the year (1999: £24m), reflecting further growth in the
market's support for our value for money products.
Overall, group life and pensions new business totalled £73m EPI in 2000 -
a decrease of 26% (1999: £99m).
INVESTMENT MANAGEMENT
=====================
Our investment management business again delivered impressive new
business results in 2000, winning £12.7bn of new institutional funds and
nearly matching the exceptional result of £13.1bn achieved in 1999. Of
the £12.7bn won this year, £11.6bn came from UK pension funds and £1.1bn
was institutional business from the Commonwealth Bank of Australia.
New business in the final quarter was £3.0bn. Major new pension fund
clients won in the quarter included Buckinghamshire County Council,
Orange and ICL. Business gains over the year brought the total number of
clients to 1,814. New contributions to defined contribution schemes were
£722 million during the year - an increase of 23%.
Our fast growing investment management business is a key strategic asset
for the Group. Total funds under management were £114bn at 31 December
2000, of which over 60% are held for external clients.
INTERNATIONAL BUSINESS
======================
Over the year new business grew by 8% to £94m EPI (1999: £87m) with
strong growth in Europe being partially offset by lower volumes in the
USA.
Legal & General America has been successful in achieving a major position
in the high net worth term assurance market. Business written is almost
entirely annual premium in nature with the positive impact that will have
on future premium revenue. Legal & General America is a highly focused
manufacturer of term insurance with a proven ability to implement
technological solutions, a strong track record of expense control and a
good reputation for underwriting.
New business in 2000 was $93m EPI down from $101m in 1999 when exceptional
volumes of business were written in advance of the introduction of the
'Triple X' solvency requirements. Legal & General America believes it is
well positioned to continue to increase its market share.
Our European businesses have benefited from a strong competitive position
and have as a consequence achieved above market growth. In France,
new business volumes increased by 28% to EUR. 32m EPI (1999: EUR. 25m).
Within that result single premium life and pension business increased
by 48% to EUR. 170m (1999: EUR. 115m). Unit trust sales increased by 30%
over the year to EUR. 65m (1999: EUR. 50m). The competitive products
that have delivered strong results in 2000 will, we believe, enable us to
increase market share further.
In the Netherlands, new business increased by 43% to EUR. 20m EPI (1999:
EUR. 14m) contrasting favourably with the decline in business seen in the
market overall. Annual premium business increased 38% to EUR. 11m (1999:
EUR. 8m) reflecting the strong support we have received following a number
of product and service initiatives. Single premium sales were
particularly strong, increasing 51% to EUR. 86m (1999: EUR. 57m) boosted
by a product launch in October 2000, which is expected to lead to further
growth in the first quarter of 2001.
For further information contact:
Investors: Peter Horsman Media: John Morgan
Investor Relations Manager Head of Public Relations
020 7528 6362 020 7528 6213
Anthony Carlisle
Citigate, Dewe Rogerson
020 7638 9571
LEGAL & GENERAL GROUP PLC
UNAUDITED NEW BUSINESS PREMIUMS
YEAR ENDED 31 DECEMBER 2000
NEW UK BUSINESS
===============
Year ended Three months to
31 December inc/ 31 December inc/
2000 1999 (dec) 2000 1999 (dec)
£m £m % £m £m %
INDIVIDUAL LIFE AND
PENSIONS BUSINESS
New annual premiums
Life:
- Mortgage related 112 107 26 30
- Savings 1 2 0 0
- Protection 16 17 6 4
Pensions:
- Individual pensions 77 73 16 15
---- ---- ---- ---- ---- ----
Total new annual premiums 206 199 4 48 49 (2)
Single premiums
Life:
- With-profits 648 448 180 106
- Other 103 186 21 36
Pensions:
- Individual pensions 342 260 55 39
- Annuities - individual 426 304 116 92
- DSS rebates 111 120 35 33
----- ----- ---- ---- ---- ----
Total single premiums 1,630 1,318 24 407 306 33
Individual life ---- ---- ---- ---- ---- ----
and pensions EPI 369 331 11 89 80 11
GROUP LIFE AND
PENSIONS BUSINESS
New annual premiums
- Group risk 31 24 6 6
- Group pensions 9 11 2 6
---- ---- ---- ---- ---- ----
Total new annual premiums 40 35 14 8 12 (33)
Single premiums
- Annuities - bulk
purchase 258 573 136 235
- Other group business 68 70 10 17
---- ---- ---- ---- ---- ----
Total single premiums 326 643 (49) 146 252 (42)
Group life ---- ---- ---- ---- ---- ----
and pensions EPI 73 99 (26) 23 37 (38)
ISAS, PEPS AND UNIT TRUSTS
New annual premiums
- ISAs/PEPs
(excluding cash ISAs) 27 23 17 13 11 18
Single premiums
- ISAs/PEPs
(excluding cash ISAs) 403 601 58 46
- Unit trusts 269 276 62 66
---- ---- ---- ---- ---- ----
Total single premiums 672 877 (23) 120 112 7
ISAs, PEPs and ---- ---- ---- ---- ---- ----
and unit trusts EPI 94 111 (15) 25 22 14
---- ---- ---- ---- ---- ----
Total UK EPI 536 541 (1) 137 139 (1)
==== ==== ==== ==== ==== ====
INSTITUTIONAL ------ ------ ---- ----- ----- ----
FUND MANAGEMENT 12,677 13,098 (3) 3,078 3,950 (22)
LEGAL & GENERAL GROUP PLC
UNAUDITED NEW BUSINESS PREMIUMS
YEAR ENDED 31 DECEMBER 2000
WORLDWIDE NEW BUSINESS
======================
Year ended Three months to
31 December inc/ 31 December inc/
2000 1999 (dec) 2000 1999 (dec)
£m £m % £m £m %
New annual premiums
Life and pensions:
-Life 160 150 38 40
-Pensions 86 84 18 20
---- ---- ---- ---- ---- ----
UK 246 234 5 56 60 (7)
-USA 62 63 10 19
-Netherlands 7 5 3 1
-France 5 5 1 1
---- ---- ---- ---- ---- ----
Total life and pensions 320 307 4 70 81 (14)
Retail investment business:
-UK 27 23 13 11
---- ---- ---- ---- ---- -----
Total new annual premiums 347 330 5 83 92 (10)
Single premiums
Life and pensions:
-Life 751 634 201 142
-Pensions 1,205 1,327 352 416
----- ----- ---- ---- ---- ----
UK 1,956 1,961 0 553 558 (1)
-USA 1 1 1 0
-Netherlands 54 35 24 9
-France 107 71 29 25
----- ----- ---- ---- ---- ----
Total life and pensions 2,118 2,068 2 607 592 3
Retail investment business:
-UK 672 877 120 112
-France 41 31 14 6
----- ----- ----- ---- ---- ----
Total single premiums 2,831 2,976 (5) 741 710 4
Equivalent premium income (EPI)
-Life and pensions
business 532 514 4 131 140 (6)
-Retail investment
business 98 114 (14) 26 23 13
---- ---- ---- ---- ---- ----
Worldwide EPI 630 628 0 157 163 (4)
==== ==== ==== ==== ==== ====
LEGAL & GENERAL GROUP PLC
UNAUDITED NEW BUSINESS PREMIUMS
YEAR ENDED 31 DECEMBER 2000
OVERSEAS OPERATIONS
IN LOCAL CURRENCY
=================
Year ended increase/
31 December (decrease)
2000 1999 %
USA ($m):
New annual premiums 93 101
Single premiums 1 1
EPI 93 101 (8)
Netherlands (EUR. m):
New annual premiums 11 8
Single premiums 86 57
EPI 20 14 43
France (EUR. m):
New annual premiums 8 8
Single premiums 170 115
Unit trusts 65 50
EPI 32 25 28
UK INDIVIDUAL EPI BY CHANNEL
============================
Year ended 31 December 2000
Annual Single Total EPI
£m £m £m %
Independent financial advisers 123 156 279 60
Business partnerships 78 31 109 24
Direct 32 43 75 16
---- ---- ---- ----
233 230 463 100
==== ==== ==== ====
Year ended 31 December 1999
Annual Single Total EPI
£m £m £m %
Independent financial advisers 107 144 251 57
Business partnerships 88 29 117 26
Direct 27 47 74 17
---- ---- ---- ----
222 220 442 100
==== ==== ==== ====
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