LEGAL & General has warned it expects further market volatility, as surging new business and annuity sales in its retirement arm helped lift profits by 17 per cent to £1.6 billion.
The company’s retirement division reported new business sales of £8.53bn in 2016, up from £2.9bn the year before, while new annuity sales soared 155 per cent to £7 billion. That boosted the division’s pre-tax profits by 17 per cent to £847 million.
The period saw L&G complete the £1.1bn buyout of the Vickers Group Pension Scheme, part of the Rolls-Royce Group, in the largest deal of its kind in 2016. It also completed £1.5bn of buy-ins with the ICI Pension Fund, including £750m in the fortnight after the Brexit vote, during what the company said had been a good year for the UK pension de-risking market.
Profits in the company’s retirement arm increased to £847m from £641m.
L&G’s investment arm saw assets under management rise by nearly 20 per cent to £894.2m, with revenue from fees rising to £714m from £651m.
The company said: “With further political and economic uncertainty anticipate in 2017 and beyond, we expect further market volatility. The risk of slowing economic activity remains and no business model can be fully immunised. However, we believe the opportunities available to the group, primarily in the UK and US, remain attractive.”
Nicholas Hyett at Hargreaves Lansdown said: “There are promising signs for the group’s longer term strategy.” He said: “The group’s bulk annuity business is performing well... The only downside is that it’s both a capital intensive and ‘lumpy’ business. Fortunately asset management is almost the complete opposite.”
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