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LONGER LIVES DENT PROFITS FOR L&G

Pensioners are now living much longer

Wednesday March 19,2008

By Andrew Johnson

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Pensioners living longer dented full-year figures at insurance group Legal & General.

The company saw profits fall from £1.233billion to £921million after setting aside a further £269million in the expectation the average 65-year-old would now live to 90 rather than 88.

L&G took a further £66million hit from customers leaving early for other insurers and £76million on floods.
The insurer is one of the UK’s biggest providers of annuities, which provide an income to pensioners until they die.

Chief executive Tim Breedon said: “We have always expected customers to live longer but it is the rate of improvement which we are changing.

“It’s good news that people are living longer but it does mean they are going to have to pay more for their annuities in the future.”

L&G shares rose 3dp to 123p despite Breedon warning of a “more challenging year” for the company.

He expected sales of mortgage-protection products to be hit by the housing market slowdown.

The Government’s decision to change Capital Gains Tax would dent sales of savings product investment bonds.
“This is clearly the consequence of an ill-thought-through proposal,” said Breedon. “It is not an isolated case. The Government is very good at listening but not at taking action.”

He said the credit crunch made it difficult for the company to predict how the year would eventually pan out.
However, Breedon added the company enjoyed a strong balance sheet and was set fair to build a strong savings business and longer-term growth.

L&G promised to lift the full-year dividend 7.6 per cent to 5.97p a share.

Asset management arm Legal & General Investment Management attracted £53billion in new business.
L&G has made a first move into India by signing a joint venture with Bank of Baroda and Andhra Bank.

Breedon said this was not a short-term move. “We saw the opportunity,” he said, “but it is an opportunity for the next five to 10 years.”