L&G grasps the nettle of longevity
The first person to live to 150 may already have been born, according to some scientists. It’s a scary thought if you are in the pension and life assurance business, with assumptions about longevity “advancing at a pace”, said Nils Pratley in The Guardian.
The UK’s third-largest life insurer, Legal & General, now expects a new 65-year-old male customer to live to 90.1 years on average – 1.3 years longer than its previous estimate. This “bigger-than-expected tweak” resulted in a £269m longevity charge and a 26% fall in last year’s operating profit to £912m, when the group reported on Tuesday.
Still, the underlying business has rarely been stronger, said Anthony Hilton in the Evening Standard. Legal & General has the capacity to expand and build market share just as its rivals “may be forced to draw in their horns”. CEO Tim Breedon sees great opportunities in the pension buyout market, where “relatively new firms have gained considerable exposure”, taking over pension schemes from companies that want to offload the risk. He reckons the market has the potential to “double, double and double again”.
Legal & General also has enough surplus cash to buy back £1bn of its shares while maintaining “a pristine credit rating”, noted Pratley. It’s a reminder that sensible life assurers, who have stuck to their core business, “could escape unscathed from the financial turmoil”.
LGEN: 12m change –18%
