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By Chris Vellacott
LONDON, May 7 (Reuters) - British insurer Legal & General saw net cash rise by more than a fifth in the firstquarter of 2014 on demand for its retirement products - easingfears the company would be hit by reforms to the UK pensionssystem.
The reforms, due to be implemented next April, effectivelyscrap a system that forced most retirees to swap their pensionsavings for an annuity that pays out an income for life.Instead, they get a choice in how they invest.
That had raised fears that insurers such as L&G that sellthe products would suffer by losing one of their most lucrativebusiness lines.
But in a trading statement on Wednesday, the company saidits sales of bulk annuities to company pension schemes, whichare not affected by the reforms, were easily offsetting adecline in sales of the products to individuals.
The group's Retirement arm saw new business premiumsquadruple to 3.3 billion pounds following the signing of a 3billion-pound bulk annuity contract with the ICI pension fund inMarch.
L&G's individual annuity sales dropped 40 percent in thequarter. Cancellations of newly bought annuities after the UKgovernment announced the reforms in March had a 15 million-pound impact, the company said.
Net cash in the quarter was up 21 percent to 301 millionpounds ($511.47 million). Operational cash generation rose 6percent to 297 million pounds, which the company attributed todemand for its pension products.
L&G said it supports the reforms as part of a "clearpro-choice, pro-consumer agenda to modernise pensions". Thecompany said it stood to benefit even though individual annuitysales would suffer, because other businesses such as fundmanagement should gain by offering an alternative use ofpensions savings.
Its fund management business, Legal & General InvestmentManagement, saw net flows of new money from clients reach 3.8billion pounds in the quarter, to bring assets to 463 billionpounds.
"We already benefit from favourable demographic trends; wehave economically and socially useful products for customers...We are excited about the prospects for our business," said ChiefExecutive Nigel Wilson.
L&G shares were trading more than 2 percent higher onWednesday morning after the earnings statement, which ShoreCapital's Eamonn Flanagan called "a robust rebuttal to those whofeared for the group's future following the Budget changes tothe annuity market". ($1 = 0.5885 British Pounds) (Reporting by Chris Vellacott. Editing by Clare Hutchison,Larry King)
