Legal & General (L&G) has warned it expects the UK protection market to shrink this year after it reported record retail sales in 2021 driven by the busy housing market.
The insurer completed £200m worth of new retail protection sales last year, a record figure up 14% from £175m in 2020, but its group risk arm saw new business dip sharply – falling by 25% to £88m from £117m.
However, L&G warned the UK retail market may cool down this year. “We expect the total protection market to be slightly smaller in 2022,” it said.
Meanwhile, L&G Mortgage Club remained the largest mortgage intermediary business being involved in around a fifth of transactions, facilitating £98bn of mortgages, up 26% from the £77bn of completions in 2020.
£2.1bn of claims paid
Overall, L&G Insurance (LGI) reported a slight uplift in new business in 2021, completing £379m worth of annual premiums compared to £372m in 2020, helped by a 14% uplift in sales from its US business to £91m.
It paid out £2.1bn of protection claims during the year, highlighting an adverse US mortality experience indicating the severity of the pandemic in America.
US Covid-related claims reached approximately US$189m, more than double the US$82m provision it had set up at the end of 2020.
L&G also noted non-Covid claims impacted the industry during the year and that it has set aside a further £57m provision for potential Covid claims in the US and UK in 2022.
LGI reported a 42% increase in operating profit to £268m was predominantly impacted by the formulaic change in LGI’s liability discount rates.
The UK New Business Value measurement of £149m was down £12m due to lower volumes in group protection, margin pressure in retail protection caused by pricing action, and movements in product mix, L&G added.
However in the US this figure was up 29% to US$155m driven by sales growth of 20% and margin growth from favourable business mix.
UK retail protection
Reviewing the retail protection market last year in its annual results, the insurer said: “The UK housing stamp duty relief contributed significantly to strong performance in 2021.”
It continued: “Protection sales were particularly strong during H1 with both a strong housing market and the increased customer awareness of protection needs during the pandemic driving up demand.”
L&G claimed to have taken a 25% market share in the third quarter of 2021 and noted enhancements to income protection and critical illness benefits had broaden its scope in the market.
UK group risk
L&G emphasised that it had expected 2021 group risk new business volumes to not reach the record levels of 2020 as a result of the renewal cycle for larger schemes.
However, it noted that retention was strong resulting in premium income growth of 6% to £405m from £382m in 2020.
“Through improved service and more refined pricing we are attracting a wider range of scheme sizes and actively dealing with more advisers in the group protection market, enabling us to gain market share and grow new business premiums,” it said.
“During H2 we launched an automated application portal which will further support growth in the smaller scheme segment.”
£2bn profit post-tax
As Health & Protection exclusively revealed, the LGI business was combined with L&G Retail Retirement on 1 January into one division, Legal & General Retail.
Led by Bernie Hickman, this division will cover the savings, protection and retirement needs of around 12 million retail policyholders and workplace members.
The insurer noted: “In line with our five-year ambition, we are targeting mid-single digit growth in revenues across our UK protection businesses.”
Overall, profit after tax at Legal & General group rose 28% to reach £2.05bn, breaking the £2bn barrier for the first time.
Group chief executive Sir Nigel Wilson said: “The expected reform of Solvency II, the roll-out of the UK government’s levelling up programme, and our growing international businesses underscore our confidence in our ability to continue delivering on a broad range of profitable growth opportunities.”