Insurance giant Legal and General disappointed the market with its first quarter revenue figure, which were barely changed from a year earlier.
New business on an annualised premium equivalent (APE) business in the first three months of 2012 edged up to £434m from £433m in the first quarter of 2011, comfortably below market expectations of £443.5m.
Net cash generation was also more or less static at £210m, up from £209m a year earlier, while operation cash generation improved to £249m from £245m. The group reiterated its guidance to deliver around £590m of operational cash generation this year from its annuities, protection and insured savings businesses, plus around £50m from the with-profits business and more than £55m from its International businesses. This is in addition to the cash generated from LGIM, general insurance, Savings investments and Group capital and financing.
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Assets under management grew by 3% in the quarter to £383bn from the end-2011 position of £371bn. Legal & General Investment Management (LGIM) enjoyed net inflows of £2.6bn in the first quarter, 29% higher than the £2.0bn of inflows in the corresponding period of 2011, and a reversal of the trend seen in the fourth quarter of 2011, when there were net outflows of £0.6bn.
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Legal & General (L&G) said it continued to enjoy good flows in April and that LGIM has a strong bulk purchase annuity quote pipeline.
"The market potential in bulk purchase annuities remains significant and with our diverse package of de-risking solutions, we are well positioned to capitalise on opportunities as they arise. Activity levels for both individual and group protection are good, with group protection APE in Q2 [second quarter] to materially exceed Q1," L&G said.
The savings business is feeling the strain a bit, however, as tough economic conditions begin to bite. Savings sales were down 6% to £300m APE from £320m in the first quarter of 2011. Net flows within Savings were negative (-£0.4bn) in the quarter, versus positive flows of £0.6bn the year before. Market conditions particularly affected Savings investments with APE down by 20% to £140m (Q1 2011: £176m).
"Although we expect market conditions to remain challenging, we remain confident in our ability to continue delivering growth in scale together with substantial cash generation in 2012 and beyond," said Tim Breedon, Group Chief Executive of L&G.
The shares fell 2.6p to 119.2p in the first couple of hours of trading on the day of the trading update.
JH
