Legal sees rising demand for private pensions

Operating profits from savings products increased 130 per cent to £115m on increased demand for private pensions and as customers invested money to escape paltry bank interest rates.

But its UK general insurance business made a loss of £8m after December’s snow caused a spike in household claims.

Group pre-tax profits rose 2 per cent to £1.1bn in 2010, on sales up 28 per cent to £1.8bn.

Announcing a 25 per cent increase in the final dividend payment to shareholders, chief executive Tim Breedon said he was “confident about the growth prospects for Legal & General”.

He said Legal will be “a growing force as the welfare state retrenches and individuals increasingly look to high-quality, good value risk, savings and investment provision.”

The group also expects to benefit from an ageing UK population, which should increase demand for its products.

He added: “Our balance sheet is strong, each of our business divisions is profitable and cash-generative, and we are delivering excellent results across the group.” Legal benefited from a “transformation” in its savings business, as confidence returned to equity markets and the amounts that can be invested in tax-free ISA accounts rose to £10,200.

But its risk business saw a 24 per cent reduction in operating profits to £560m after the general insurance business made a loss.

Profits from the risk business were also eroded by greater upfront costs after a record 11 per cent increase in new individual annuities and a 6 per cent rise in housing and protection premiums.

Its investment management arm LGIM also saw strong growth in 2010 as the stock market rebounded and its managed funds increased in popularity.

Funds under management grew 12 per cent to £354bn and profits rose to a record £206m, up 20 per cent on the previous year.