(Adds detail, management and analyst comment)
By Chris Vellacott
LONDON May 7 British insurer Legal & General
saw net cash rise by more than a fifth in the first
quarter of 2014 on demand for its retirement products - easing
fears the company would be hit by reforms to the UK pensions
The reforms, due to be implemented next April, effectively
scrap a system that forced most retirees to swap their pension
savings for an annuity that pays out an income for life.
Instead, they get a choice in how they invest.
That had raised fears that insurers such as L&G that sell
the products would suffer by losing one of their most lucrative
But in a trading statement on Wednesday, the company said
its sales of bulk annuities to company pension schemes, which
are not affected by the reforms, were easily offsetting a
decline in sales of the products to individuals.
The group's Retirement arm saw new business premiums
quadruple to 3.3 billion pounds following the signing of a 3
billion-pound bulk annuity contract with the ICI pension fund in
L&G's individual annuity sales dropped 40 percent in the
quarter. Cancellations of newly bought annuities after the UK
government announced the reforms in March had a 15 million-
pound impact, the company said.
Net cash in the quarter was up 21 percent to 301 million
pounds ($511.47 million). Operational cash generation rose 6
percent to 297 million pounds, which the company attributed to
demand for its pension products.
L&G said it supports the reforms as part of a "clear
pro-choice, pro-consumer agenda to modernise pensions". The
company said it stood to benefit even though individual annuity
sales would suffer, because other businesses such as fund
management should gain by offering an alternative use of
Its fund management business, Legal & General Investment
Management, saw net flows of new money from clients reach 3.8
billion pounds in the quarter, to bring assets to 463 billion
"We already benefit from favourable demographic trends; we
have economically and socially useful products for customers...
We are excited about the prospects for our business," said Chief
Executive Nigel Wilson.
L&G shares were trading more than 2 percent higher on
Wednesday morning after the earnings statement, which Shore
Capital's Eamonn Flanagan called "a robust rebuttal to those who
feared for the group's future following the Budget changes to
the annuity market".
($1 = 0.5885 British Pounds)
(Reporting by Chris Vellacott. Editing by Clare Hutchison,