Legal & General expects the UK retail protection market to be hit by a softer housing market and cost of living crisis concerns – continuing its bearish outlook for the sector.
The insurer issued the caution when announcing a 14.5% fall in retail protection sales over 2022, although group protection new business improved by 21.6%.
Last year the insurer warned that it expected the UK protection market to shrink in 2022 after reporting record retail sales in 2021, driven by the busy housing market.
According to the results, L&G completed £171m worth of retail protection new business last year, down 14.5% from a record £200m in 2022. However, its group risk arm saw sales increase from £88m in 2021 to £107m in 2022.
Its total, UK retail protection gross written premimums (GWP) increased to £1,485m from £1,444m while group protection GWP rose 5% to £427m from £405m.
In the group’s annual results released today, L&G said in 2023, it expects the retail protection market to be “impacted by a softer housing market and by affordability considerations for consumers”.
However, it added its group protection business had “performed well” and its medium-term ambition remained unchanged as it continued to target “mid-single digit growth in revenues across our UK protection businesses to 2025”.
Despite the fall, L&G said it was the largest insurer and had taken almost a quarter of all new business in the smaller market, based on Association of British Insurer (ABI) figures for the third quarter of the year.
“L&G continues to lead the UK protection market with a market share of 23%, delivering a point-of-sale decision for more than 81% of our customers,” it said.
Turning to group risk, L&G continued: “Our online quote and apply platform for smaller schemes continues to perform well, processing 600 new clients over the year (up from 80 in 2021) and we are seeing strong growth in this part of the market.
“Group protection supported 3,223 members of income protection schemes to return to work during 2022,” it added.
Retail insurance profit up 27%
In the US, protection new business value was down 37% from £262m to £166m, claiming 5% of the new business market.
However, gross written premiums in the US were up to £1,222m from £1,053m, meaning total protection gross premiums across the group rose to £3,134m from £2,902m.
L&G said in the US it expects its “ongoing technology investments and new partnerships will position us for premium growth” adding it is “using technology to improve customer experience while reducing cost to become the partner of choice for a wide range of distribution.”
It’s retail insurance operations in the UK and US combined for £341m operating profit, up 27% from the £268m operating profit in 2021.
Group profits hit £2.29bn
Across the entire group, L&G reported profit after tax of £2.29bn in 2022, up 12% from £2.05bn in the previous year.
Sir Nigel Wilson, group chief executive at Legal & General, (pictured) said: “We have delivered another strong result in 2022, ahead of market expectations, with operating profit of £2.5bn and EPS of 38.3p, both up 12%, cash generation of £1.9bn up 14%, capital generation of £1.8bn up 10%, dividends up 5% to 19.37p and an ROE of 21%.
“Our diversified and highly synergistic business model continues to deliver significant benefits. Our balance sheet is strong and highly resilient, with a record solvency ratio of 236% and we have once again received 100% of cash flows due from our Direct Investments.
“At a time when many households are being affected by the rising cost of living, our commitment to inclusive capitalism is more important than ever to help improve the lives of our customers, build a better society for the long-term and create value for our shareholders.”