Legal & General reassures City with robust half-time earnings outcome

● Boss praises group’s flexible business model and optimistic outlook

Legal & General unveiled a surge in interim earnings yesterday partly driven by changes in life expectancy rates and a solid performance in the pensions business.

L&G saw operating profit climb 27 per cent to £988 million in the period after a “greater than expected mortality experience” allowed it to release £126m. That compared with £777m in the first half of 2016.

Customers are not living as long as expected, which helps life insurers such as L&G which pay out bigger sums the longer an individual lives.

L&G said that its “longevity assumptions” are still under review, so more cash could be released if they are too high.

Group chief executive Nigel Wilson said the company’s business model, which is heavily skewed to the UK, “has proven to be resilient to political, economic and regulatory uncertainties”.

On the outlook, the company said: “Although no business model can be fully immunised to market volatility, we believe the opportunities available to the group, primarily in the UK and US, remain largely unchanged.

“Despite a number of potentially destabilising events in H1 2017 including a snap UK general election and the start of Brexit negotiations with the EU, our successful performance continues to demonstrate the resilience of our operating model and our focus on the excellent execution of our strategy.” Wilson commented: “Our strategy, based around six long-term macro and demographic growth drivers, not only allows us to grow L&G’S business, but also the scale of our long-term capital enables us to support inclusive growth across the UK.”

Earlier this year, the group said it plans to shift some of its business to Dublin once Britain leaves the European Union. The firm will move part of its investment management operation to Ireland so it can continue to serve its customers.

L&G Retirement’s profits jumped 40 per cent to £566m from £405m last time, while annuity sales soared to £1.6 billion from £700m.

The fund management division’s earnings lifted 13 per cent to £194m.

Assets under management were up 13 per cent to £951bn. General insurance was less successful, however, with profits halving to £15m primarily due to non-weather-related claims, predominantly loss of water due to a surge in industry-wide plumbing claims.

The company said it also added £1bn to its solvency 11 surplus, the capital cushions helping insurers to meet their regulatory requirements.