Bad storms leave Legal & General with a £15m headache
Legal & General said its general insurance business took a £15m blow after severe weather conditions swept through the UK last December.
It said operating profits in its general insurance operating profit fell 13% to £51m for the full-year as parts of the UK saw their wettest weather on record when storms Desmond, Eva and Frank hit the British Isles at the end of 2015.
But group operating profits grew 14% to £1.45bn over the period, while net cash also climbed 14% to £1.25bn as it benefited from entering new markets, including lifetime mortgage products and pension risk transfer in the US.
It also benefited from growth in life insurance and workplace retirement schemes, following changes to the individual annuity market in Chancellor George Osborne's Budget last April, which allow pensioners to retire without having to buy an annuity.
L&G hiked its dividend by almost a fifth to 13.4p per share after the performance came in slightly above City expectations.
However, shares fell nearly 6% as the company revealed its capital position was weaker than some analysts had predicted it would be.
The company posted a coverage ratio of 169% and a capital surplus of £5.5bn, over what its required by the Solvency II insurance rules, which require insurance companies to prove they can withstand a shock of the scale seen during the last financial crisis.
Group chief executive Nigel Wilson said the business was planning for more market volatility on the road ahead.
He said: "We believe that by aligning our strategy to growth drivers together with our diversified revenue streams, creates resilience.
"No model, however, can be completely immune from slowing global growth and continuing market uncertainty."
The pensions and investment giant has moved into the bulk annuity market, managing the pension fund risk of large firms following Mr Osborne's shake-up of the pension industry.
UK bulk annuity sales stood at £1.9bn, from 63 policies in 2015, compared to £5.9bn from 54 policies the year before.
Legal & General Retirement, which sells annuity products, saw new business fall to £2.9bn in 2015, down from £6.6bn.
However, operating profits in the division rose from £428m to £639m over the period.
Shore Capital analyst Eamonn Flanagan said it was an "excellent set of results".
He said that the company had a "punchy" outlook which highlights its "very clear strengths".