LEGAL & GENERAL ASSURANCE SOCIETY.
Financial highlights 2014 2013
----- -----
GBPm
------------------------------------------- ----- -----
Operational cash generation 472 474
------------------------------------------- ----- -----
New business strain (48) (73)
------------------------------------------- ----- -----
Net cash generation 424 401
------------------------------------------- ----- -----
Experience variances, assumption changes,
tax and non-cash movements 36 43
------------------------------------------- ----- -----
Operating profit 460 444
------------------------------------------- ----- -----
INCREASING SCALE AND EFFICIENCY
Net cash generation increased by 6% to GBP424m (2013: GBP401m)
reflecting increased scale and efficiency with our Insurance and
Savings business increasing their stock of premiums and assets
respectively. New business strain of GBP(48)m (2013: GBP(73)m)
included a GBP10m improvement in Insurance new business strain and
was GBP15m lower in our Workplace and Mature savings divisions.
LGAS operating profit increased 4% to GBP460m(2013: GBP444m).
The operating profit of Insurance was GBP370m (2013: GBP355m)
benefitting from an increased contribution of our market leading
Retail Protection business. This was partially offset by lower
profits from our General Insurance business following adverse
weather experience in Q1 2014, which resulted in additional claims
of GBP12m. The combined operating ratio for GI was 87%. Savings
operating profit was GBP90m (2013: GBP89m).
Insurance
Financial highlights 2014 2013
GBPm
------------------------------------------- ------ ------
UK Insurance new business annual premiums 230 218
------------------------------------------- ------ ------
Insurance new business strain (5) (15)
------------------------------------------- ------ ------
UK Insurance gross premiums 1,407 1,326
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General Insurance gross premiums 377 375
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Total UK gross premiums 1,784 1,701
------------------------------------------- ------ ------
Retail Protection had another exceptional year, with gross
premiums up 7% to GBP1,056m (2013: GBP990m) and sales up 11% to
GBP165m (2013: GBP148m). This represents another improvement in our
share of the UK retail protection market, reinforcing our strong
market leading position.
The business continues to benefit from the strength and breadth
of our distribution covering IFAs, where we lead the market and
have grown sales by 15% to GBP99m (2013: GBP86m) and building
societies, where we are the sole provider to societies covering
around 85% of UK building society members. The Legal & General
Network facilitated GBP40 billion of mortgages in the year,
approximately 1 in 6 of all UK mortgages. Our direct channel
continues to grow, with sales increasing 34%, now accounting for
16% of new business (2013: 13%).
Group Protection delivered a 4% increase in gross premiums to
GBP351m (2013: GBP336m) with new business sales marginally down on
2013 at GBP65m (2013: GBP70m) following some price increases we
implemented in 2014.
UK Insurance new business strain reduced to GBP5m (2013:
GBP15m), benefiting from higher sales and further operational
efficiency.
General Insurance gross premiums increased marginally to GBP377m
(2013: GBP375m) with direct to consumer premiums increasing 29% to
GBP88m (2013: GBP68m). Operating profit of GBP59m (2013: GBP69m)
resulted from a strong combined operating ratio of 87% (2013: 84%)
and included a GBP12m impact of the adverse weather experienced at
the start of the year.
SAVINGS
Suffolk Mature Consol. Total
Asset movements Platforms(1) Workplace Life Savings Overseas Adj LGAS
GBPbn
------------------- ------------- ---------- -------- --------- --------- -------- ------
As at 1 January
2014 64.1 8.7 6.6 36.3 4.5 (6.8) 113.4
------------------- ------------- ---------- -------- --------- --------- -------- ------
Gross inflows 10.1 2.8 1.3 1.4 0.4 (0.5) 15.5
------------------- ------------- ---------- -------- --------- --------- -------- ------
Gross outflows (4.7) (0.6) (0.5) (4.4) (0.4) 0.7 (9.9)
------------------- ------------- ---------- -------- --------- --------- -------- ------
Net flows 5.4 2.2 0.8 (3.0) - 0.2 5.6
------------------- ------------- ---------- -------- --------- --------- -------- ------
Market movements 2.4 0.2 0.3 2.7 (0.1) (0.3) 5.2
------------------- ------------- ---------- -------- --------- --------- -------- ------
As at 31 December
2014 71.9 11.1 7.7 36.0 4.4 (6.9) 124.2
------------------- ------------- ---------- -------- --------- --------- -------- ------
1. Platforms include Cofunds and Investor Portfolio Services
(IPS).
Savings assets increased 10% in the year to GBP124.2bn (2013:
GBP113.4bn) as the strategy of developing highly scaleable and
efficient platforms continues to deliver strong growth. Savings
operating profit increased marginally to GBP90m (2013: GBP89m) with
reduced contribution from our mature savings business being offset
by better performance in our workplace business as it continues to
increase in scale.
Our platform business delivered net flows of GBP5.4bn (2013:
GBP7.9bn) as assets under administration increased 12% to GBP71.9bn
(2013: GBP64.1bn). Cofunds continues to lead the market, with a 21%
share of the platform market and positive flows across all channels
(institutional, retail and bancassurance). The integration of
Cofunds is on track. We have delivered annualised cost savings of
GBP7m per annum at the end of 2014 and continue to target GBP11m
per annum by the end of 2015.
The retail savings market is expected to benefit from the
greater flexibility in pensions savings, as introduced in the
recent budgetary reforms which, coupled with higher ISA limits, is
expected to increase retail savings levels. We continue to enhance
our existing functionality and improve our operational efficiency
to deliver high quality, low cost savings products to existing and
potential customers to capitalise on these trends.
Legal & General has recently launched its Direct to Consumer
('D2C') solutions, expanding our non-advised services to
intermediaries in February 2015 by providing a cost effective
digital solution directly to their consumers and offering a D2C
service for ISA purchases via the Legal & General website.
In Workplace, assets have increased 28% to GBP11.1bn (2013:
GBP8.7bn) with 1.2 million employees and 2,287 schemes now on the
platform. This represents a further 325,000 customers and over 500
new schemes added since the end of 2013.
The increasing scale of Workplace has resulted in a halving of
the operating losses experienced in 2013 to GBP15m in 2014. Our
proposition continues to benefit from incremental enrolment into
pre-existing schemes and new schemes, where we have a market share
of c20% of new members being enrolled.
The defined contribution market, with the expected tripling of
DC savings in the UK over the next 10 years, provides a significant
opportunity to the Group. We continue to offer our default
auto-enrolment funds at 50bps, below the 75bps cap recently
prescribed and our recently announced SME solution, with no
up-front charges, will target smaller schemes with a highly
digitalised solution.
The continued growth in administered assets and increasing
efficiency, including a 60% reduction in unit costs over the last
three years, means that we are targetting to break-even in
Workplace by the end of 2015.
Our SIPP business, Suffolk Life, delivered net inflows of
GBP0.8bn (2013: GBP0.9bn). As a result the assets of Suffolk Life
have increased 17% in the period to GBP7.7bn (2013: GBP6.6bn).
In Mature Savings assets were GBP36.0bn (2013: GBP36.3bn). Net
outflows of GBP(3.0)bn (2013: GBP(3.7)bn) were in-line with our
expectations and partially offset by positive market movements of
GBP2.7bn (2013: GBP3.8bn).
LEGAL & GENERAL CAPITAL.
POSITIVE CONTRIBUTION TO CASH AND PROFITS
Financial highlights 2014 2013
GBPm
----------------------------- ----- -----
Operating profit 203 179
----------------------------- ----- -----
Operational cash generation 162 137
----------------------------- ----- -----
Legal & General Capital (LGC) increased operating profits by
13% to GBP203m (2013: GBP179m) representing the smoothed expected
return on LGC assets after expenses, and equates to an assumed
annualised investment return of 4.3% (2013: 4.1%) on an average
asset base of GBP4.8bn (2013: GBP4.5bn). LGC assets increased by
10% to GBP5.1bn at the end of 2014 (2013: GBP4.7bn). Actual
investment return was 3.5% (2013: 4.4%).
LGC is building an asset base to support the expansion of
earnings, both within LGC and the other divisions. The key
objectives are to:
(1) Increase risk adjusted returns on our regulatory solvency
margin and surplus shareholder assets.
(2) Providing better access to assets to back our annuity
liabilities in LGR. As an example, LGC acquired a GBP518m
long-lease portfolio in the first half of 2014, which were
syndicated to LGR and LGC, providing LGR with GBP326m of
attractively priced assets.
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