Legal & General hit by £64 million impairment loss

Company enjoys notable rise in profits, but is held back following sale of platform

Legal & General hit by £64 million impairment loss

Insurance News

By Paul Lucas

It’s been a good day at the office for Legal & General, with the company reporting a sharp rise in profits: however, the firm has been held back somewhat by a steep impairment loss.

Its former Cofunds platform, which was sold to Aegon last year, hit the company to the tune of a £64 million loss thanks to investment in the platform subsequent to the acquisition, as well as its IPS platform. This was offset by gaining £4 million on the sale of Suffolk Life to Curtis Banks, with the company reporting an overall net loss on the deals of £60 million. 

Still that didn’t stop the company from enjoying a good report overall, with profits climbing 17% to £1.6 billion. Of note, Legal & General Investment Management saw a 3% rise in operating profits; while L&G Retirement saw operating profits climb from £611 million in 2015 to £811 million last year, flying in the face of other insurers which have moved away from the retirement market. 

“Our long term approach to strategy and investment coupled with outstanding execution has again delivered terrific financial performance in 2016,” said Nigel Wilson, group chief executive. “Profit before tax up 17% to £1.6 billion, net release from operations up 12% to £1.4 billion, EPS up 19% at 22.2p and a return on equity of nearly 20%.

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“We believe the UK remains a great place for us to help fill the huge funding gaps and under-provision of key financial products. We are playing our part to regenerate the UK’s cities, delivering economic growth and jobs, capitalise on its world-leading universities and improve commercialisation of its scientific discoveries. Additionally, we are accelerating the evolution of our US businesses.”

As for its insurance business, the company saw a minor 1% rise in profits from £315 million to £317 million, but it did have a warning for the year ahead.

“In general insurance, we see the potential to grow the business through distribution agreements and increased growth in the direct channel,” the company wrote in its results statement. “Recently signed distribution agreements in aggregate are expected to increase gross premiums by c.10% in 2017. Despite recent poor weather in the UK, general insurance has had a strong start to 2017, however, exceptional weather events can impact future profitability.”

The company is also highly active in the pensions market and last year completed a £1.1 billion purchase of the Vickers Group Pension Scheme. 


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