Legal & General Delivers Improved Results in 2010

Posted on Mar 18, 2011 by Sergio Ulloa (G+)

The major British based insurer Legal & General (L&G) has unveiled a rise in pre-tax profits to reach £1.09 billion (US$1.74 billion) in 2010 - up from £1.07 billion (US$1.71 billion) delivered in 2009. Plans also identify opportunities for future growth in both the domestic UK and overseas insurance markets. L&G total sales worldwide grew by 28 percent - £1.8 billion (US$2.88 billion) - which was the key driver in delivering the UK insurer's profits in 2010, including new business in the emerging insurance markets in Asia especially India; India and China are pinpointed for future growth. The life insurer was able to surpass its £600 million (US$960 million) target for cash generation in the year ending 31 December 2010 - making a total of £728 million (US$1.16 billion) available. L&G's savings arm was the catalyst for the improvement in the company's results, with operating profits up by 130 percent over the year to total £1.15 billion (US$1.84 billion). L&G is predicting that the UK's savings and life market will continue to offer strong returns in the future, reflecting the need to redress underfunding which occurred in previous years. The life insurers said that it is well positioned in the market with its business model and product mix making it ready to capitalize on the potential for growth in demand. However, L&G will continue to exploit demands in its international insurance operations, especially emerging markets in India and China, which are currently enjoying an economic boom. This will provide a safeguard to offset any slowdown in demands in western hemisphere countries as the impact of austerity measures are implemented to overcome national debt problems. L&G aims to expand international operations within the two Asian powerhouses China and India by employing opportunities through bancassurance deals in order to create platforms for distribution of L&G insurance products. In the burgeoning Indian insurance industry, L&G has enjoyed success with more than 130,000 policies sold during 2010 through its bancassurance joint venture - India First. This joint venture is expected to continue to enjoy product growth. Additionally, L&G has recently received approval by the Chinese regulatory authority - the China Insurance Regulatory Commission (CIRC) - to open an office in China providing scope for a possible future Chinese bancassurance venture. India First is L&G's bancassurance Indian insurance venture with local banks Bank of Baroda and Andhra Bank in which the British insurer holds a 26 percent stake. India First was established in March 2010 and has a network of over 4,800 branches across India and provides life and health insurance along with financial, retirement, savings and investment planning products and services. The insurance industries in China and India have become essential markets for insurers in order to capitalise on the increasing wealth of an expanding middle class population seeking savings and protection products. L&G has operations in Egypt and the Gulf states, a region also experiencing economic prosperity, although on a smaller scale than Asia. The region offers scope for expansion because of the relative fledgling status of the insurance sector in these countries. Meanwhile, the UK insurance sector has seen insurers consolidate market positions since the 2007-2008 global financial crises with L&G competing with other major insurance companies such as Prudential, Standard Life and Aviva. Opportunities for growth in the savings and pension sectors in the UK - and other Western European countries - have been assessed as substantial in order to close a gap of some £2 trillion (US$3.3 trillion) annually in the funding for corporate and individual contributions. This is compounded by the diminishing value of state provided pensions, with the possible imposition of legislation in the UK for all workers in the UK to contribute to personal pension plans. L&G has been able to turn-round its shortfall in profitability immediately following the 2007- 2008 worldwide financial crises, although unlike some multinational insurers it did not require a government bailout loan to avoid collapse, and is now confident that its market position will deliver future growth opportunities. The company is also satisfied that it has built up sufficient cash reserves - with the target of adding a further £700 million (US$1.1 billion) in 2011 - to provide a total capital reserves of £3.7 billion (US$5.92 billion), which will be more than adequate to meet the new European legislation on solvency - to be introduced in 2012. Insurance Companies Mentioned: Legal & General Legal & General was founded in 1836 and is based in the United Kingdom and offers a variety of risk, savings and investment management products. L&G saving products includes unit trusts, individual savings accounts, investment bonds and pensions. In the risk market the insurer offers individual and group protection, individual and bulk purchase annuities and general insurance. The investment management business includes index funds, fixed income, risk management solutions, property and private equity. L&G's International segment includes term insurance, group protection, wealth management and unit-linked saving. Prudential Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide. Aviva Europe's fourth largest insurance company, with more than 300 years of experience in the global insurance industry, Aviva is committed to the safety and satisfaction of its customers. They sell a broad range of insurance products including motor and property insurance, protection and health insurance, business insurance, life insurance and pensions. Standard Life plc. Standard Life was established in 1825 and headquartered in Edinburgh, Scotland. Since its beginnings, Standard Life has expanded into a financial services company offering pensions, life assurance, and investment management to over 6.5 million customers around the globe.