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LONDON (Alliance News) - Legal & General Group PLC Wednesday said it expects to write more than enough bulk-purchase annuities to offset an expected decline in the individual annuities market in the wake of UK regulatory changes, as it reported a 21% increase in quarterly net cash generation.
In a statement, the life and mortgages and investments provider said net cash generation increased to GBP301.0 million in the quarter to end-March from GBP249.0 million a year earlier. Operational cash generation increased to GBP297.0 million from GBP281.0 million.
Moving to dispel fears that changes unveiled in the UK government's 2014 Budget in March that give retirees more flexibility in how they manage their pensions in that they no longer have to buy individual annuities, Legal & General said bulk purchase annuity premiums increased to GBP3.05 billion from GBP357.0 million. The figure was boosted by a GBP3.00 billion deal for the ICI Pension Fund announced in March.
However, individual annuity sales fell by 40% to GBP244.0 million as people cancelled GBP15.0 million annuities taken out prior to changes made in the Budget.
Legal & General said it expects to write growing volumes of bulk purchase annuity business to more than offset individual annuity reductions. It expects the individual annuity market to contract by about 50% in 2014 and by a further half in 2015.
Overall, annuity assets increased by GBP5.0 billion to GBP38.3 billion.
Legal & General Investment Management (LGIM) reported GBP3.8 billion in net inflows in the quarter, boasting GBP463.00 billion in assets under management at the end of the period. In the first-quarter of 2013, assets under management came to GBP441.00 billion.
In addition, Legal & General reiterated previous guidance on operational cash generation in 2014, adding that it's on track to exceed the GBP4.1 billion annuity premiums written in 2013 with a "strong" pipeline in bulk annuities.
"Net cash and operational cash, up 21% and 6% respectively, are at their highest-ever levels. LGIM assets under management of GBP463.00 billion is at an all-time high, retail protection sales hit a new first-quarter record and Cofunds grew assets under administration to GBP66.00 billion. Our record annuity sales were driven by the UK's largest ever bulk purchase annuity transaction, the GBP3.00 billion deal for the ICI Pension Fund," Nigel Wilson, chief executive, said in a statement.
Legal & General shares were Wednesday quoted at 219.00 pence, up 2.6%.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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