Legal & General 2023 results show strong bulk annuity volumes

Legal & General’s 2023 results show a step-change in both retail and institutional annuity volumes, underpinned by a larger contractual service margin and rising new business value. The expansion in bulk and individual annuities feeds directly into a bigger store of future profit and supports a higher dividend, reinforcing the group’s capital-light growth narrative. Retail and individual annuities: scale and mix shift

Legal & General Retail’s annuity sales reached £1.43bn in 2023, an all‑time high for the business. This was a 50% increase on 2022, when retail annuity sales were £954m.

Within this, individual annuity momentum was already visible in the first half, with individual annuity volumes of £575m in H1 2023 compared with £453m in H1 2022. Legal & General reported that sales of fixed-term annuities more than doubled in 2023, signalling a meaningful shift in product mix alongside lifetime annuities.

Legal & General stated that its overall lifetime annuity market share has more than tripled since the start of 2016, rising from 6.5% to 20.2% in 2023. The combination of higher absolute sales and a larger share of the lifetime segment positions the group as a leading writer in the UK individual annuity market. Institutional and bulk annuities: volume and retained premium

On the institutional side, Legal & General reported £13.7bn of institutional annuities in 2023. Of this, £10.5bn was retained premium, showing the scale of liabilities now being written and held on balance sheet.

The wider market backdrop has been supportive, with H1 2023 bulk annuity transaction volumes exceeding £20bn according to Professional Pensions. Legal & General’s institutional annuity volumes sit against this context of elevated de‑risking activity by pension schemes, with the group capturing a strong flow of new institutional business. Profit emergence and CSM under IFRS 17

Legal & General reported that its store of future profit increased 9% to £14.7bn in 2023, compared with £13.5bn in 2022. Under IFRS 17, the group’s contractual service margin (CSM) grew 9% to £13.0bn from £11.9bn in 2022, closely tracking the expansion in the store of future profit.

New business CSM contributed £1.2bn in 2023, up from £0.9bn in 2022. This uplift in new business CSM is consistent with the higher annuity volumes written across both retail and institutional channels, and it feeds directly into the enlarged CSM balance. Solvency II New Business Value increased 17% to £265m in 2023, compared with £226m in 2022. The increase in Solvency II new business value sits alongside the growth in CSM and store of future profit, providing a regulatory capital lens on the economics of the 2023 annuity cohort. Capital return and dividend progression

Legal & General’s board declared a dividend per share of 20.34p for 2023, up 5% from 19.37p in 2022. The higher dividend is supported by the growth in CSM, the 9% increase in the store of future profit, and the 17% rise in Solvency II New Business Value.

For insurance investors, the linkage between bulk and retail annuity growth, the build‑up of CSM and future profit, and the 5% dividend increase is now a central feature of the group’s equity story.

--- Sources: https://www.legalandgeneralgroup.com/investors https://group.legalandgeneral.com/en/newsroom/press-releases/legal-general-declares-2023-the-landmark-year-for-annuities-evidenced-by-sales-hitting-all-time-high https://group.legalandgeneralgroup.com/media/rp5ap0tr/2023-full-year-results-full-press-release-and-analyst-pack.pdf