Legal & General Group PLC (LSE:LGEN) forecast a £10mln hit to full-year revenues and profits as a result of the chaos in the pensions market in September but maintained operating profit guidance overall.
The FTSE 100-listed insurer said it expected resilient full-year 2022 operating profit growth in line with the 8% delivered in the first half (£1.16bn vs £1.08bn) and full-year 2022 capital generation of £1.8bn in line with the guidance given at the half-year stage.
But in a trading update, L&G said the turmoil in liability-driven investment (LDI) strategies that followed former chancellor Kwasi Kwarteng's infamous mini-budget led to clients selling higher fee products to meet collateral requests.
The insurer said that as a result it expects annual revenue and profits in its direct benefit pension scheme business to reduce by about £10mln in 2022.
L&G gave the thumbs up to the chancellor’s references yesterday to solvency II reform, which it believes represents a positive step forward.
The proposals “will allow us greater flexibility to make appropriate investments", it said, and estimated "the reform to the risk margin would increase the group's solvency ratio by 3-4 percentage points".
The global Pension Risk Transfer (PRT) business has continued to perform strongly, securing new business wins in each of the UK, US and Canada in the last few weeks, the group said.
Year-to-date, LGRI (Legal & General Retirement Institutional) has transacted or is in exclusive negotiations on £9.3bn of global PRT business (UK: £7.1bn and International: $2.6bn), which already exceeds the £7.2bn of global PRT secured in 2021.
“We are on track to deliver another strong PRT result this year and a record year for our international PRT business”, L&G said, adding “PRT volumes have been secured at margins and capital strain that are in line with our long-term average”.
“Our UK annuity portfolio has continued to be highly resilient to market moves and has not experienced any difficulty in meeting collateral calls.”