18 Mar, 2008
Chris Marshall | 08:47:11 | 18 March 2008
& General has reported a 26% decline in profits, down to
£912 million last year on a European embedded value basis,
after taking a £269 million hit in anticipation of people's
The picture painted by measuring its profits on an International
Financial Reporting Standards basis looked even worse, with profits
down by 56% to £718 million, but the group said that 2007 was
being compared to a previous year in which there had been a number
of one-off positives.
The group put the results partly down to the impact of strengthened
longevity assumptions which cost an additional £269 million.
Group chief executive Tim Breedon said this reflected thinking in
official circles such as the FSA and Pensions Regulator, as well
the insurer's own figures.
L&G was also hit by losses to the tune of £76 million due
to the flooding last year. Persistency experience also weighed down
on the group, costing it £66 million in 2007, mostly due to
pensions term assurance.
Breedon painted a gloomy picture for many of the products offered
by insurance companies. He said that equity market volatility
coupled with capital gains tax uncertainty surrounding investment
bonds may dampen short-term market growth in a year that is likely
to be more testing than the last for savings market conditions.
'In bonds we suffered in the second half due to volatility and
uncertainty,' Breedon told a conference call. 'That was
really a poorly thought through exercise by the Treasury. It will
end up reducing choice for savers and potentially savings
Breedon predicted that the investment bond market would decline by
20% over the next six months. He also said that protection sales
would be hit by the housing market downturn.
Continuing L&G's 40-plus years of dividend increases, the
recommended full-year dividend rose 7.6% to 5.79p.