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L&G to expand in U.S., Europe after slump in U.K. annuity sales

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(Bloomberg)–Legal & General Group Plc Chief Executive Officer Nigel Wilson said the biggest manager of U.K. pensions is resilient enough to offset a slump in annuity sales to retirees, as it generates more revenue from the U.S. and Europe.

Legal & General is looking to enter the lifetime mortgage market next year and sees “tremendous opportunity” in bulk annuity sales in the U.S., Wilson said on a conference call from London today. It will boost direct lending to companies in Europe and continue to expand the investment unit with further acquisitions, he said.

“We are much more resilient than people often think,” Wilson said. The government’s pension reforms are “going to cause some short term issues for those totally dependent on annuities, but we are not. We have to transform our business.”

L&G joined Friends Life Group Ltd. today in reporting lower sales of individual annuities, which provide pensioners with a fixed annual income, after U.K. Chancellor of Exchequer George Osborne’s March budget gave retirees greater freedom with their savings. Both insurers are looking to develop new products and services to help recapture lost revenue.

Sales of annuities dropped 43 percent to 400 million pounds ($673 million) in the first half from a year ago, Legal & General said. That was offset by sales of the product to company pension plans, which more than quadrupled to 3.1 billion pounds.

Operating profit rose 11 percent to 636 million pounds and the insurer increased its interim dividend 21 percent to 2.90 pence per share.

The company’s shares were unchanged at 231.6 pence at 3:06 p.m. in London trading.

Friends Life

Friends Life reported a 7 percent drop in pretax operating profit to 159 million pounds and a 24 percent decline in the value of new business, a measure of future cash flow, to 65 million pounds.

CEO Andy Briggs said the biggest area of growth in the retirement market will be more flexible products, which unlike annuities don’t restrict clients to annual payments.

Friends Life said it expects to spend not more than 30 million pounds this year on developing a new range of products and services that will include an investment platform aimed at individual savers. Briggs said they are also working with Schroders Plc to develop a range of investment fund options.

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