LONDON, Nov 19 (Reuters) - Legal & General expects
to transact 11.5 billion pounds ($14.90 billion) in bulk
annuities this year, and plans to issue sterling-denominated
debt, the British insurer said in a business update on Tuesday.
L&G is one of the biggest players in the bulk annuity
market, which involves taking on some or all of the risk of a
company defined benefit, or final salary, pension scheme.
The market is growing but requires hefty amounts of capital
to back it, according to European Union insurance solvency
rules.
L&G said it expected to launch the bond "shortly".
"We remain disciplined in our deployment of capital, and our
balance sheet and net cash flow are strong," Chief Executive
Nigel Wilson said.
"We are taking advantage of favourable market conditions to
raise debt."
L&G has transacted 8.5 billion pounds in bulk annuity deals
in the year to Oct 31, and said it was in exclusive negotiations
on a further 3 billion pounds that it expected to complete
before year-end.
The bulk annuity market is expected to hit a record of at
least 40 billion pounds this year, though the market remains
small compared with the 2 trillion pounds in liabilities in the
final salary pension sector.
L&G struck some of the biggest bulk annuity deals this year,
including a 4.6 billon pound deal with the Rolls-Royce UK
pension fund in June. Its main rivals are unlisted specialist
firms Pension Insurance Corporation and Rothesay Life.
L&G sold 829 million pounds in individual annuities, which
pay pensioners a fixed income for life, in the year to Oct 31,
up 34% year-on-year.
But sales of equity release mortgages fell 15% to 823
million pounds. The mortgages enable householders to take out
cash against the value of their home, which would be repaid
after they die or move into long-term care.
Legal & General Investment Management, one of the biggest
investors in the UK stock market, saw net flows of 83 billion
pounds in the year to date, bringing assets under management to
1.2 trillion pounds.
The business update "indicates strong H2 results", Shore
Capital analysts said in a note, reiterating their buy rating on
the stock.
L&G's shares were up 1.1% at 284 pence at 0910 GMT, compared
with a 0.75% rise in the FTSE 100.
($1 = 0.7720 pounds)
(Reporting by Carolyn Cohn; editing by Jason Neely)