Strong growth at UK life arm helps boost Legal & General

Legal & General posted its 13th successive quarter of growth in the UK yesterday, with a 27 per cent increase in new life and pensions business compared with the same period last year. After taking more modest growth from its international businesses into account, the group's total new business rose 6 per cent year-on-year to £413m over the three months to the end of March.

The insurer's UK operation, responsible for £306m of the total, benefited from strong sales of pensions to both individuals and corporate customers, with premiums up 68 per cent.

Sales of annuities rose 27 per cent over the quarter, although L&G said it had suffered a decline in bulk annuity purchases from pension schemes. The insurer said such business was unpredictable but that it expected higher sales later in the year.

The only drag on UK performance was a 35 per cent fall in premiums on retail investments. Tim Breedon, the group chief executive, said this was because the insurer had done fewer deals with non-tax-exempt pension schemes, whose money is often invested in retail unit trusts. There was an unusually high number of such deals in the first quarter of 2006.

The decline in retail investment premiums meant L&G marginally underperformed analysts' expectations for the quarter. The insurer's shares, which fell marginally to 157.1p yesterday, have also lagged the life insurance sector as a whole.

Mr Breedon said investors had been more focused on insurers with greater international exposure, or on merger and acquisition stories such as Aviva's bid for Prudential.

"The L&G story hasn't been flavour of the month," he said. "There has been a sense that the excitement was happening elsewhere, though I believe that is beginning to change."

Tim Young, an insurance analyst at Collins Stewart, said the insurer's stock was under-rated. He said: "If all eyes have been on Prudential - an over-valued and low-quality stock - this is a buying opportunity for under-valued, high-quality stocks and L&G certainly qualifies."

The insurer also announced yesterday that Robin Phipps, its board director with responsibility for UK business, is to take early retirement in July, aged 56. Mr Breedon said the retirement was entirely on "friendly terms" and praised Mr Phipps as one of L&G's "unsung heroes".