Legal & General Group Plc (LON:LGEN) continues to see great momentum in all its businesses in the year to date and has experienced particularly strong growth in recent weeks. We remain strategically well placed to deliver strong, attractive growth and returns in our core markets.
Legal & General Retirement (“LGR”) has delivered total sales for 2017 to date1 of £6.2bn, with the business showing strong momentum in the UK and US institutional pension risk transfer markets, as well as in individual annuities and lifetime mortgages.
Annuity sales generated £4.5bn of annuity premium, consisting of: £3.3bn of UK institutional pension risk transfer business, $0.7bn of US institutional pension risk transfer business and £0.6bn of UK retail annuities. We have doubled our institutional pension risk transfer business in the US versus 2016 and have now written over $1.6bn of US business since entering the market. LGR sales for 2017 to date also include £0.8bn of longevity insurance.
We have significantly outperformed the market in the retail space, with UK individual annuity premiums up 93%, equivalent to a 14% market share. We have written over £0.9bn of lifetime mortgage advances, an increase of 71%, and our innovative, digital lifetime mortgage business now has a leading 35% market share.
Our UK and US pipeline for pension risk transfer is the largest it has ever been. Additionally we expect the UK’s ageing demographic and extensive use of cash drawdowns to make the lifetime mortgage market increasingly attractive.
Legal & General Investment Management (“LGIM”) achieved total external net inflows of £38.1bn to the end of October. Inflows were well-diversified by product line and geography. Our liability driven investments (“LDI”), active fixed and property funds delivered strong performances, and LGIM continues to be the market leader in defined benefit and defined contribution solutions in the UK, and a global market leader in LDI.
By the end of October, International net inflows were £26.1bn, with £11.3bn from the US and, encouragingly, a further £10.9bn from Europe. Our US asset management business continues to deliver with over 330 institutional clients and over $170bn of assets. We have established our regional office in Tokyo to complement our capabilities in Hong Kong, and LGIM’s recently-announced entry into the European ETF market will provide access to one of the fastest growing segments in asset management.
Legal & General Capital (“LGC”) has generated £256m of gross proceeds from transactions with a gross value of £821m to the end of October and has committed and invested £319m to new investments as it continues to recycle investments into new strategic UK real asset opportunities. Our investment programme in housing, urban regeneration, clean energy and scale-ups continues to make good progress. Since October, LGC has also announced the acquisition of its second later living business, Renaissance Villages, for a net purchase price of £51m, and the acquisition of a second major housing site, Arborfield in Berkshire, with capacity and planning consent for 1,500 units.
Legal & General Insurance (“LGI”) continued to benefit from our strong market shares in UK retail protection and US term assurance with total gross written premiums to the end of October up 6%2 to £2.1bn. The management actions taken to address the adverse claims experience reported in our Group Protection business in H1 2017 are becoming evident and experience is improving in line with management expectation, and the first half losses have been completely reversed in H2.
General Insurance (“GI”) gross written premiums are up 13% to £305m by the end of October. We continue to increase our direct to consumer sales, have launched our market leading digitally innovative SmartQuote proposition and we have been successful in winning further distribution agreements for our household products. In October we agreed to acquire Buddies, a pet insurance provider, which will enable us to further diversify our product range in GI. Following our adverse claims experience in the first quarter of the year, we took management action which has mitigated the ongoing impact of claims on the GI result.
Our business growth is supported by a strong balance sheet with a Solvency II surplus of c.£6.9bn and a shareholder coverage ratio of 190%3.
Nigel Wilson, CEO, commented: “L&G is on track for a record year for earnings and profits. Our core business divisions are generating formidable momentum. With yesterday’s announcement of the sale of our closed book, in run-off Mature Savings business for £650m, our business is now well-positioned and focused on the products and geographies where we see optimum growth and cultural alignment. Our market leading positions and strong balance sheet, coupled with our management capability is allowing us to benefit from global growth opportunities.”
1. At 6 Dec 2017
2. Increase versus 31 October 2016. LGI comparison excludes disposed business (L&G Netherlands).
3. At the end of October, the Group’s estimated Solvency II surplus was c.£6.9bn with Eligible Own Funds of c.£14.6bn, a Solvency Capital Requirement (“SCR”) of c.£7.7bn and a shareholder basis coverage ratio of 190%. In line with our practice, this assumes that Transitional Measures for Technical Provisions are recalculated to current market conditions, as we believe this provides the most up to date and meaningful view of our Solvency II position. The shareholder basis adjusts for the Own Funds and SCR attributable to our With-profits fund and the final salary pension scheme. Legal & General Group’s core subsidiaries are rated AA- by Standard & Poors