Wednesday, 7 May 2014

Legal & General - Q1 Results

LGEN was added to my income portfolio just 5 weeks ago (link).

I was pleased to read the Q1 results issued today (link via Investegate). They reported a record first quarter of 2014  and reassured that the axing of the obligation to buy an annuity in this year's March Budget will not impact the business as much as many predicted. However, around £15m was lost through annuity cancellations during the extended cooling-off period which was offered to customers post-Budget.

Operational cash rose by 6% to £297m and net cash generation was up 21% to £301m, with total new business up 67%. Assets under management (AUM) hit an all-time high at £463bn, and IFA platform Cofunds increased its assets under administration by 25% to £66bn.

L&G were a pioneer of the simple low cost tracker fund. I remember buying their FTSE All Share Index fund in the early 1990s as a PEP (later to become ISA). The insurer is therefore well placed in the retail investment market because it has particular expertise in passive funds - this has helped its UK retail business to grow with net flows of £300m as passive funds become more popular after the introduction of RDR in 2013.

Workplace savings net flows were up 66% on the same period last year at £500m (2013 - £300 m). This continued on a steady upward trend benefiting from incremental enrolment into pre-existing schemes and new schemes in the quarter. In the pension auto-enrolment market, DC pension AUM increased 11% to £31.8bn, up from £28.7bn the previous year, after last year's big win with the M&S pension contract. This is likely to be a growing sector for the Company as the roll-out of workplace pensions gets underway.

Nigel Wilson, Group Chief Executive, said: "There is strong demand for our pension de-risking and protection products in both markets - the £1.8 trillion of UK DB liabilities will provide substantial future business. We believe the UK DC market will grow from around £250bn today to £3 trillion by 2030. LGIM's recent agreement to acquire Global Index Advisors (GIA), a US based DC provider will accelerate our US growth."

The company said it is on course to meet the guidance it gave at the full-year results. The results have been well received and at close of business, the share price was up 3% at 220p.

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