RISK. OVERVIEW.

John Pollock, Group Executive Director (Risk) (photo)

“We have maintained our leading positions in our key markets and delivered strong results and growth in 2011.”

JOHN POLLOCK
GROUP EXECUTIVE DIRECTOR (RISK)


HIGHLIGHTS

  • LEADING POSITION IN KEY MARKETS UNDERLINED WITH [APE] SALES OF £498M UP 30% ON PREVIOUS YEAR (2010: £382M).

  • FIRST £1BN PENSION BULK ANNUITY SCHEME AND FIRST LONGEVITY INSURANCE TRANSACTION COMPLETED IN 2011.

  • GROWTH IN BOTH [OPERATIONAL CASH GENERATION] AND [NET CASH GENERATION].

  • REDUCED [NEW BUSINESS STRAIN] ON INCREASED VOLUMES OF PROTECTION SALES.

PERFORMANCE

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2011

2010

 

PVNBP1
£m

Contribution2
£m

Margin
%

PVNBP1
£m

Contribution2
£m

Margin
%

1

The [present value of new business premiums (PVNBP)] on the [EEV] basis is defined as the present value of annual premiums plus single premiums for any given period. It is calculated using the same assumptions as for the contributions from the new business but determined as at the point of sale.

2

From new business on an EEV basis.

Protection

931

86

9.3

860

55

6.4

Annuities

2,515

252

10.0

2,065

245

11.9

Longevity

n/a

7

n/a

n/a

n/a

n/a

Total

3,446

345

9.8

2,925

300

10.3

OPERATING PROFIT

£561m

(2010: £560m)

  • Strong operating profit performance exceeding that achieved in the previous year.

NET CASH GENERATION

£451m

(2010: £429m)

  • Net cash generation has increased by 5% on 2010 with reduced new business strain in protection on higher volumes of business.

  • Lower new business surplus in annuities of £35m (2010: £60m).

IFRS PROFIT BEFORE TAX

£733m

(2010: £662m)

  • IFRS profit before tax up £71m on 2010 with a contribution from investment variances of £172m (2010: £102m).

INDIVIDUAL PROTECTION

£131m

NEW BUSINESS APE

(2010: £118m)

  • We continue to grow sales of non-mortgage related protection products and sales of protection for business needs and large sum policies.

  • Sales in all distribution channels have been strong in 2011, reflecting our competitive position, the increasing focus of distributors on protection and improved awareness amongst consumers of the need for these products.

  • In 2011 we signed an agreement with Barclays to be their sole supplier of advised sales of family protection for five years.

  • £401m paid out for individual protection claims in 2011.

GROUP PROTECTION

£46m

NEW BUSINESS APE

(2010: £57m)

  • Sales down 19% as traditional corporate markets continue to be adversely impacted by the uncertain economic environment.

  • Our group protection business paid out £268m in claims to help relieve the financial suffering of over 2,000 policyholders and dependants in 2011.

ANNUITIES

£251m

NEW BUSINESS APE

(2010: £207m)

  • 2011 was a very strong year for annuity new business.

  • Bulk Annuities (pension scheme insurance solutions) grew premium income by 62%, including successful completion of the bulk annuity scheme with the trustees of the Turner & Newall Pension Scheme for over £1bn.

  • An additional £70m of APE was generated by the first pure longevity insurance transaction with a pension scheme, Pilkington Superannuation Scheme. Legal & General insures the pension scheme against adverse change in the longevity experience of its pensioners.

  • Annuity payments of £1.4bn made in 2011.

GENERAL INSURANCE

£304m

GROSS WRITTEN PREMIUMS (GWP)

(2010: £281m)

  • Gross written premiums are up 8% on 2010, the growth coming from our household book whilst Mortgage Payment Protection volumes remained broadly flat.

  • Total new business at £110m was 38% ahead of the prior year (2010: £80m). Operating expenses have been controlled in line with business growth.

  • Operating profit of £42m (2010: loss of £8m) reflects generally favourable weather experience during the year.

  • £168m paid out for general insurance claims in 2011.

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