Legal and General affected by longer life expectancies
20 March 2008 / by Joy Tibbs
Although Legal and General is maintaining a positive outlook, its revised life expectancy predictions have significantly impacted 2007 operating profits. The UK's third largest insurer was forced to set aside an additional £269 million for the year on the back of expectations that customers will live longer.
The company's chief executive, Tim Breedon, anticipates that men who are now aged 65 will live to an average of 90.1 years compared with its previous prediction of 88.8 years. The insurer also expects that more people in their 60s and 70s will live into their 80s and 90s.
"We have always expected them to live longer, but it is the rate of improvement that we are changing," Mr Breedon told reporters.
Profits fell 26 per cent in 2007 to 912 million compared with £1.23 billion for 2006. Profits were also hampered by a £30 million provisional charge linked to flooding claims. Despite this, pensions sales rose 20 per cent and new business raked in £359 million for the year. International business operating profit was up 15 per cent to £86 million from £75 million in 2006.
"Headline numbers are lower, but taking into account the significant positive regulatory and reserving changes in 2006, and the £269 million of longevity strengthening this year, the business has performed consistently over the past two years," he says.
However, Mr Breedon predicts the coming year will be a tough one, with the credit squeeze and changes to capital gains tax laws kicking in. "We expect 2008 will be a challenging year for the economy and for the industry," added Mr Breedon.
© Fair Investment Company Ltd