Legal & General gains £126 million boost as life expectancy slows

Old people dying faster than expected unlocked a multi-million pound windfall for insurer Legal & General on Wednesday.

The group said a change to life-expectancy assumptions released £126 million set aside to cover future insurance and pension payments.

Chief executive Nigel Wilson said larger payments could follow in future, setting up a possible return of that cash to shareholders or a boost to L&G’s capital buffers.

“People have been dying much quicker than anybody expected and that as a consequence is releasing cash which gives us extra cash at the group,” he said.

Rising life expectancy in previous decades has plateaued in recent years, questioning the long-held assumption we will live longer.

For example, one third of FTSE 100 companies with final-salary pension schemes slashed their assumptions for future life expectancy last year, figures from consultancy LCP show.

The reserve release helped Legal beat City forecasts and deliver a 27% rise in first-half operating profits to £988 million.

The company’s bulk annuity business, where it takes over the responsibility for paying final-salary pensions, doubled in size after clinching £1.6 billion worth of deals.

L&G’s fund management unit carried on its march, adding nearly £22 billion of assets under management in the first half versus £9.6 billion last time.

However, the company’s shares fell by 2.05%, or 5.65p, to 270.10p, because of a wider slump in the FTSE 100 index.

Car insurer Hastings also printed numbers today showing an increase in customers. Hastings’ market share of UK car insurance rose to 7% from 6.2% last time due to more shopping around.

Changes to compensation payments and increased taxes have made premiums higher, leading to a surge of customers switching on to price-comparison sites.