Legal & General celebrates 17% increase in profits in 2016
Insurer Legal & General has cheered a double-digit rise in profits helped by surging annuity sales and a raft of new business for its retirement arm.
The FTSE 100 firm said annual pre-tax profits jumped 17% to £1.6 billion in 2016, with Legal & General Retirement (LGR) securing record profits after inking deals with the pension funds of ICI and Rolls-Royce Group.
LGR's n ew business rose to £8.5 billion from £2.9 billion over the period, while new annuity sales soared 155% to £7 billion, bumping up the division's pre-tax profits by 17% to £847 million.
The firm's said its investment arm had delivered a strong performance in an "uncertain environment", with assets under management growing by a fifth to £894.2 billion.
However, a move to stop "box profits" - a controversial practice where asset managers keep the difference when buying and selling units - saw transactional revenues within Legal & General Investment Management slip 30% to £30 million.
Group chief executive Nigel Wilson said the company's long-term approach to strategy and investment had delivered a "terrific financial performance".
"We believe the UK remains a great place for us to help fill the huge funding gaps and under-provision of key financial products.
"Additionally, we are accelerating the evolution of our US businesses," he added.
"We look forward to the future with confidence as our core markets are growing, our market share is increasing, our balance sheet is strong and we have positive cash and earnings momentum."
L&G, which manages the investments of around 4% of FTSE 100 firms, hiked its full-year dividend by 7% to 14.35p.
However, investors took a dim view of the financial update, pushing shares 1% lower in morning trading on the London Stock Exchange.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the update showed another "steady performance" by the firm.
"The group's bulk annuity business is performing well, and Legal & General enjoys a market-leading position.
"The only downside is that it's both a capital intensive and 'lumpy' business, dependent on a few large transactions a year. Fortunately, asset management is almost the complete opposite.
"That means the rapid growth in assets under management is particularly welcome, with the combination of liability driven and passive investment strategies meaning the division should be well placed to benefit from current trends."