L&G growth continues unabated

RESURGENT investor confidence saw big inflows of new business at insurer Legal & General last year.

The company said it had attracted more than £1bn in new annual policy premiums, including Isas and unit trusts. The surge helped boost profits by 9% to £1.2bn, despite pouring an extra £240m into its annuity reserves to cover shortfalls here. These reflect the fact that policyholders are living much longer.

L&G's profits are at the top end of expectations and there was progress almost entirely across the board. The company reported record funds under management, up 20% to £166bn.

The group's life and pensions businesses grew strongly with profits up from £165m to £222m and the investment management operation attracted £15.5bn of new funds, up from £13.1bn in 2003. The general insurance business, however, remained difficult with profits here down from £36m to £32.m.

L&G said it was encouraged by the significantly lower level of subsidence claims during the year though bad weather claims had risen during the year.

Earlier this month the company said it had agreed to the £85m sale of its 90% stake in Gresham Insurance to Barclays, which already owns the remaining 10%. Legal & General expects to book a £26m exceptional profit on the sale.

Elsewhere the company said it was positive about prospects for the current year, having increased profits at the same time as significantly strengthening annuity reserves. The increase in new business growth marks a return of consumer confidence in the savings market, it added.

L&G increased its share of the UK retail market by 0.9% to 9.5% and said it expected to match this rate of increase this year despite the fact that mortgage rates might rise still further.

{1}Chief executive David Prosser delivered an upbeat assessment of current trading, saying that he believed that the insurer would be able to continue growing dividends this year. Shareholders get a final dividend of 3.45p, making a total for the year of 5.06p ? up from 4.9p this time last year.

Prosser skated over recent regulatory issues, including its run-in with the Financial Services Authority over endowment mis-selling. The insurer secured a landmark ruling from the Financial Services and Markets Tribunal earlier this year after the City body ruled that a £1.1m fine for mis-selling should be reduced.

Although the tribunal upheld a decision to penalise L&G for mis-selling it concluded that the FSA investigation into regulatory breaches at L&G had been 'flawed'. The investigation concerned sales by L&G of its Flexible Mortgage Plans between 1997 and 1999.

L&G had denied any blame though the FSA had taken a sample of 250 endowment cases and found wrong-doing in 60 cases - the tribunal, however, found definite mis-selling in just eight cases.

Today Prosser looked resolutely forward, insisting that brand confidence was high. He added: 'In the UK we have again significantly grown our market share. During 2004 customers placed over £22bn with us, a powerful demonstration of the confidence placed in our brand. Looking ahead we expect to benefit from improving market conditions and, in the UK, to continue growing market share profitably.'

Legal & General said that the year had started well and the signs were that consumer demand for savings policies remained encouraging. In the City, analysts welcomed L&G's results, which they said showed a broad strength with no signs of particular weakness.