Q1 2008 New Business Results
Legal & General Group Plc
16 April 2008
Legal & General Group Plc
Interim management statement
For the three months to 31 March 2008
WORLDWIDE NEW BUSINESS REMAINS STRONG YEAR ON YEAR
Highlights:
• Worldwide new business of £372m(1):
• in-line with Q1 2007 (£368m)
• up 6% on Q4 2007 (£352m)
• UK new business of £335m
• in-line with Q1 2007 (£338m)
• up 2% on Q4 2007 (£328m)
• Nationwide Building Society distribution relationship now live
• Risk business - record new business volumes
• sales of £141m - up 41% on Q1 2007 (£100m)
• pension buyout sales quadrupled to £722m(2) (Q1 2007: £165m)
• individual protection sales resilient despite weaker housing market
• Savings new business stable quarter on quarter, lower year on year
• non profit pension volumes remain strong
• bond sales reflect market volatility and CGT changes
• core retail investment new business of £42m up 20% on Q1 2007 (£35m)
• Investment management gross new business of £6.1bn(3) (Q1 2007:
£5.5bn)
Tim Breedon, Group Chief Executive, said:
'These results show the strength of Legal & General's market position and
diverse business model against a backdrop of changing economic and industry
conditions. Our new business has held steady year on year and has grown against
the fourth quarter of 2007.
'We recognise the challenges of investment market volatility, the housing market
slow-down and consumer uncertainty. But we also see the opportunities. We have
taken a leading position in the rapidly expanding pension buyout market; we see
long term growth in mass affluent and high net worth savings; our investment
management business continues its winning formula; and we are deploying our
expertise in selected overseas markets.
'We have the financial and operational strength to weather short term
uncertainties, whilst seizing the opportunities which will support long term
profitable growth.'
Notes:
1: All figures in this report are, unless otherwise stated, quoted on the APE
basis.
APE: Annualised Premium Equivalent = new regular premium + 10% of new single
premium
2: Single premium
3: Gross new institutional funds, including institutional unit trust sales
Risk businesses
Annuities
As predicted, the new pension buyout market is expanding rapidly. After winning
a record level of business in Q4 2007 (£62m), we further increased volumes in Q1
2008, to £72m - over four times the level reported a year ago (Q1 2007: £17m).
This business continued to be dominated by shorter duration pensions in payment.
Quotation activity remained very high.
Individual annuity sales of £19m were above the previous quarter (Q4 2007: £16m)
reflecting modestly improved competitive conditions.
Protection
Individual protection volumes were resilient at £36m, remaining at a similar
level to Q4 2007 (£37m) despite ongoing pressures in the housing market. We
continued to benefit from our broad product offering and our partnership with
Nationwide Building Society went live in February. Group protection sales were
steady year on year at £14m (Q1 2007: £14m), but down on Q4 2007 (£18m)
reflecting seasonality in the business.
Outlook
We continue to see high levels of pension buyout quotation activity. As
previously indicated, we expect volumes in the first half of 2008 to be
maintained broadly at the increased level reported in Q4 2007. We believe
volatility in investment markets is causing some deferral of individual annuity
purchase decisions, and this may continue. We continue to manage our aggregate
exposure including the mix of individual annuity and pension buyout businesses.
The outlook for the housing market remains challenging. We expect to outperform
the individual protection market in 2008, based on the strength of our product
and distribution franchise. The pipeline of activity in group protection
supports our confidence in further progress through the remainder of this year.
Savings businesses
Pensions
We continued to write higher levels of non profit pension business nearly two
years after the A-day changes came into effect. While Q1 2008 new business of
£69m was stable against the £69m written in Q1 2007, it remains significantly
ahead of Q1 2006 volumes of £41m. We continued to grow SIPP volumes - SIPPs have
a more flexible structure and attract mass affluent and high net worth customers
with larger average lump sums and increments. Our investment in systems to
improve operational efficiency and in product development continued in Q1 2008.
Unit linked bonds
The uncertainty caused by proposed changes to Capital Gains Tax and ongoing
volatility in equity markets continued to impact sales of unit linked bonds in
Q1 2008. Volumes reduced from £53m in Q4 2007 to £40m in Q1 2008.
Retail investments
Sales of core retail investment products increased to £42m (Q1 2007: £35m),
benefiting from the launch of our partnership with Nationwide Building Society
in February and new product developments.
With-profits
With-profits savings volumes of £43m were lower than the corresponding prior
year period (Q1 2007: £60m) but broadly stable on Q4 2007 (Q4 2007: £45m). 91%
of sales related to pensions written in the with-profits part of the long term
fund.
Outlook
Savings market conditions in 2008 are more testing than in 2007. Investment
market volatility and potential reduction in household disposable income may
limit short term market growth. However we continue to see attractive strategic
opportunities for Legal & General in the savings market and are taking steps to
enhance our position. Our proposed acquisition of Suffolk Life, a SIPP provider
with a leading reputation in the high net worth segment, is intended to further
strengthen and broaden our savings offering. Our new fund of funds retail
investment product will launch in Q2 2008 with our appointment by Bradford &
Bingley to manage their £400m multimanager investment portfolio. Some
confidence in the unit linked bond market may now return given the clarification
of the fiscal position in the Budget towards the end of the first quarter,
however sales are expected to remain at lower levels than historically. We
believe that our unit linked bond products remain attractive to a wide range of
savers.
International new business
Sales of term assurance business in our USA operation continued to develop, with
$23m in the first quarter (Q1 2007: $21m). In the Netherlands volumes were
stable at €12m in challenging market conditions (Q1 2007: €12m). In France
volumes of €20m (Q1 2007: €17m) reflected higher regular premium and group risk
sales, partially offset by a reduction in savings business after the fiscal
stimulus last year.
Investment management
Our institutional investment management business made a strong start to 2008,
winning £6.1bn(3) of gross new institutional funds in Q1 (Q1 2007: £5.5bn). Our
core index tracking offering continues to resonate with the investment
marketplace, while our complementary actively managed and liability driven
investment services provide important additional services for our clients.
Outlook
LGIM has a strong track record in attracting new funds under management, with an
average of £24bn per annum over the last 5 years, excluding institutional unit
trust sales. Against this backdrop, new funds won in 2007 were exceptional at
£53bn. We expect inflows to return to more normalised levels during 2008.
Balance sheet management
Our main UK operating subsidiary Legal & General Assurance Society maintains its
AA+ financial strength rating ('very strong') from Standard & Poor's and Aa1
rating from Moody's ('excellent').
In July 2007, we announced a £1bn on-market share buyback programme. As at 31
March 2008, £593m had been bought back, with £275m of this effected in Q1 2008.
We expect to complete the £1bn buyback of shares later this year.
Enquiries to:
Investors:
Jonathan Maddock, Head of Investor Relations 020 3124 2150
Nicola Marshall, Investor Relations Manager 020 3124 2151
Media:
John Godfrey, Corporate Communications Director 020 3124 2090
Richard King, Head of Media Relations 020 3124 2095
Anthony Carlisle, Citigate Dewe Rogerson 07973 611888
Notes:
A copy of this announcement can be found in the News and Results section of our
shareholder web site at http://investor.legalandgeneral.com/releases.cfm
Issued share capital at 31 March 2008 was 6,084,240,408 shares of 2.5p each.
Financial Calendar:
2008 Annual General Meeting 14 May 2008
2008 Interim and new business results 5 August 2008
Q3 2008 New business results 23 October 2008
Q4 2008 New business results 29 January 2009
Forward-looking statements:
This document may contain certain forward-looking statements with respect to
certain of Legal & General Group Plc's plans and its current goals and
expectations relating to future financial condition, performance and results. By
their nature forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances which are beyond Legal & General
Group Plc's control, including, among others, UK domestic and global economic
and business conditions, market related risks such as fluctuations in interest
rates and exchange rates, the policies and actions of governmental and
regulatory authorities, the impact of competition, the timing impact and other
uncertainties of future mergers or combinations within relevant industries. As a
result, Legal & General Group Plc's actual future condition, performance and
results may differ materially from the plans, goals and expectations set out in
Legal & General Group Plc's forward-looking statements. Legal & General Group
Plc does not undertake to update forward-looking statements contained in this
document or any other forward-looking statement it may make.
Legal & General Group Plc
Unaudited New Business Premiums
Three months to 31 March 2008
WORLDWIDE NEW BUSINESS
Three months to 31 March 2008 Three months to 31 March 2007
Annual Single APE Annual Single APE Increase/
premiums premiums premiums premiums (decrease)
Restated1 Restated1 Restated1
£m £m £m £m £m £m %
-----------------------------------------------------------------------------------------------------------------------
Protection
- Individual protection 36 - 36 42 - 42 (14%)
- Group protection 14 - 14 14 - 14 0%
-----------------------------------------------------------------------------------------------------------------------
50 - 50 56 - 56 (11%)
Annuities
- Individual (non profit) - 175 18 - 253 25 (28%)
- Individual (with-profits) - 8 1 - 18 2 (50%)
- Bulk purchase - 722 72 - 165 17 324%
-----------------------------------------------------------------------------------------------------------------------
- 905 91 - 436 44 107%
-----------------------------------------------------------------------------------------------------------------------
Total risk 50 905 141 56 436 100 41%
-----------------------------------------------------------------------------------------------------------------------
Non profit savings
- Unit linked bonds - 402 40 - 739 74 (46%)
- Individual pensions 43 261 69 43 262 69 0%
- DWP rebates - - - - - - N/A
With-profits savings
- with-profits bonds - 38 4 - 26 3 33%
- Individual pensions 25 126 38 34 212 55 (31%)
- DWP rebates - 5 1 - 11 1 0%
- Group pensions - 2 - 1 1 1 (100%)
-----------------------------------------------------------------------------------------------------------------------
Total life and pensions savings 68 834 152 78 1,251 203 (25%)
-----------------------------------------------------------------------------------------------------------------------
Core retail investments1
- Unit trusts 1 294 30 2 208 22 36%
- ISAs 4 82 12 2 111 13 (8%)
-----------------------------------------------------------------------------------------------------------------------
5 376 42 4 319 35 20%
-----------------------------------------------------------------------------------------------------------------------
Total savings 73 1,210 194 82 1,570 238 (18%)
=======================================================================================================================
Total UK risk and savings new 123 2,115 335 138 2,006 338 (1%)
business
=======================================================================================================================
- USA 12 - 12 11 - 11 9%
- Netherlands 3 59 9 3 56 8 13%
- France 10 49 15 2 78 10 50%
25 108 36 16 134 29 24%
-----------------------------------------------------------------------------------------------------------------------
France retail investment business - 7 1 - 6 1 0%
=======================================================================================================================
Total international new business 25 115 37 16 140 30 23%
=======================================================================================================================
=======================================================================================================================
Total worldwide new business 148 2,230 372 154 2,146 368 1%
=======================================================================================================================
1. Total UK core retail investments excludes institutional investments in unit trust funds which are disclosed as part
of institutional fund management new business (see Investment Management below). 2007 has been restated to reflect this
change.
Legal & General Group Plc
Unaudited New Business Premiums
Three months to 31 March 2008
WORLDWIDE NEW BUSINESS APE QUARTERLY PROGRESSION
3 months 3 months 3 months 3 months 3 months
to to to to to
31.03.08 31.12.07 30.09.07 30.06.07 31.03.07
Restated1 Restated1 Restated1 Restated1
£m £m £m £m £m
-----------------------------------------------------------------------------------------------------------------------
Protection
- Individual protection 36 37 41 40 42
- Group protection 14 18 16 15 14
-----------------------------------------------------------------------------------------------------------------------
50 55 57 55 56
Annuities
- Individual (non profit) 18 16 24 23 25
- Individual (with-profits) 1 - 2 1 2
- Bulk purchase 72 62 12 21 17
-----------------------------------------------------------------------------------------------------------------------
91 78 38 45 44
-----------------------------------------------------------------------------------------------------------------------
Total risk 141 133 95 100 100
-----------------------------------------------------------------------------------------------------------------------
Non profit savings
- Unit linked bonds 40 53 62 62 74
- Individual pensions 69 60 60 64 69
- DWP rebates - - - - -
With-profits savings
- With-profits bonds 4 3 2 2 3
- Individual pensions 38 40 48 56 55
- DWP rebates 1 1 4 6 1
- Group pensions - 1 - 5 1
-----------------------------------------------------------------------------------------------------------------------
Total life and pensions savings 152 158 176 195 203
-----------------------------------------------------------------------------------------------------------------------
Core retail investments1
- Unit trusts 30 28 26 27 22
- ISAs 12 9 12 24 13
-----------------------------------------------------------------------------------------------------------------------
42 37 38 51 35
Total savings 194 195 214 246 238
=======================================================================================================================
Total UK risk and savings new business 335 328 309 346 338
=======================================================================================================================
- USA 12 11 12 11 11
- Netherlands 9 7 6 6 8
- France 15 6 9 17 10
-----------------------------------------------------------------------------------------------------------------------
36 24 27 34 29
France retail investment business 1 - - 1 1
=======================================================================================================================
Total international new business 37 24 27 35 30
=======================================================================================================================
=======================================================================================================================
Total worldwide new business 372 352 336 381 368
=======================================================================================================================
1. Total UK core retail investments excludes institutional investments in unit trust funds which are disclosed as part
of institutional fund management new business (see Investment Management below). 2007 has been restated to reflect
this change.
Legal & General Group Plc
Unaudited New Business Premiums
Three months to 31 March 2008
INVESTMENT MANAGEMENT
Three months to 31 March Increase/
2008 2007 (decrease)
Restated1
£m £m %
-----------------------------------------------------------------------------------------------------------------------
Managed pension funds
- Pooled funds 5,308 4,922 8%
- Segregated funds 223 68 228%
-----------------------------------------------------------------------------------------------------------------------
5,531 4,990 11%
Other funds1 568 499 14%
=======================================================================================================================
Total new funds 6,099 5,489 11%
=======================================================================================================================
Attributable to:
Legal & General Investment Management 5,613 5,059 11%
Legal & General Retail 486 430 13%
Investments
INVESTMENT MANAGEMENT QUARTERLY PROGRESSION
3 months 3 months 3 months 3 months 3 months
to to to to to
31.03.08 31.12.07 30.09.07 30.06.07 31.03.07
Restated1 Restated1 Restated1 Restated1
£m £m £m £m £m
-----------------------------------------------------------------------------------------------------------------------
Managed pension funds
- Pooled funds 5,308 19,903 13,989 10,646 4,922
- Segregated funds 223 230 1,925 380 68
-----------------------------------------------------------------------------------------------------------------------
5,531 20,133 15,914 11,026 4,990
Other funds1 568 871 492 506 499
=======================================================================================================================
Total new funds 6,099 21,004 16,406 11,532 5,489
=======================================================================================================================
Attributable to:
Legal & General Investment Management 5,613 20,247 16,149 11,167 5,059
Legal & General Retail 486 757 257 365 430
Investments
1. Other funds includes institutional investments in unit trust funds managed by Legal & General Retail Investments
which were previously disclosed as UK core retail investments APE. 2007 has been restated to reflect this change.
INTERNATIONAL OPERATIONS IN LOCAL CURRENCY
Three months to 31 March 2008 Three months to 31 March 2007 Increase/
Annual Single APE Annual Single APE (decrease)
premiums premiums premiums premiums %
-----------------------------------------------------------------------------------------------------------------------
USA ($m): 23 - 23 21 - 21 10%
Netherlands (€m): 4 78 12 4 83 12 0%
France (€m):
- Life and pensions 13 64 19 4 116 16 19%
- Unit trusts - 9 1 - 9 1 0%
-----------------------------------------------------------------------------------------------------------------------
UK INDIVIDUAL APE BY CHANNEL
Three months to 31 March 2008
Annual Single Total APE % of
£m £m £m total
-----------------------------------------------------------------------------------------------------------------------
Independent financial advisers 83 1,040 187 76%
Tied 22 313 53 21%
Direct 4 38 8 3%
-----------------------------------------------------------------------------------------------------------------------
Total 109 1,391 248 100%
-----------------------------------------------------------------------------------------------------------------------
Three months to 31 March 2007
Annual Single Total APE % of
Restated1 Restated1 Restated1 total
£m £m £m Restated1
-----------------------------------------------------------------------------------------------------------------------
Independent financial advisers 95 1,365 231 75%
Tied 24 416 66 22%
Direct 4 57 9 3%
-----------------------------------------------------------------------------------------------------------------------
Total 123 1,838 306 100%
-----------------------------------------------------------------------------------------------------------------------
1. Total UK core retail investments excludes institutional investments in unit trust funds which are disclosed as part
of institutional fund management new business (see Investment Management above). 2007 has been restated to reflect this
change.
This information is provided by RNS
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