L&G to benefit from shrinking welfare state

17th Mar 2011 07:03

Legal & General is confident, despite a drop in full-year operating profit, as sales rose 28% and big cuts in state benefits force people to make their own provisions. The country's fourth-largest life insurer grew worldwide Annual Premium Equivalent (APE) sales to £1.8bn last year from £1.4bn in 2009.Group new business jumped 38% to £1.25bn, net new funds rallied 80% to £3.1bn and assets under administration increased by 16% to £64bn.European Embedded Value (EEV) operating profit fell 7% to £1.22bn, but profit before tax more than tripled to £1.68bn from £552m a year ago.On an international financial reporting standards (IFRS) basis operating profit was down 10% at £1bn, but pre-tax profit edged up to £1.09bn from £1.07bn the year before.A 24% slump in operating profit at the Risk business to £560m was largely to blame, following a reduction in the positive new business strain in annuities, losses in general insurance due to December's cold weather, and a net increase in reserves of £59m in respect of annuitant mortality.Analysts at Panmure Gordon called the numbers "solid", with profits ahead of expectations on an EEV basis and slightly below on an IFRS basis."The shares have been impacted by the recent market uncertainties but, in our view, this has created an excellent buying opportunity," they told clients in a note Thursday.Savings profits more than doubled to £115m from £50m and investment management made £206m compared with £172m last time.Net cash generation of £728m was way past the £600m target. L&G expects to generate £700m in 2011."We are confident about the growth prospects for Legal & General," chief executive Tim Breedon said."There is consolidation in many of our markets, and this further underpins our confidence that Legal & General will be a growing force as the welfare state retrenches and individuals increasingly look to high-quality, good value risk, savings and investment provision."The final dividend goes up 25% to 3.42p a share, bringing the total for the year to 4.75p, up 24%.