Strong demand for annuities and retail investment products in the UK helped Legal & General, the country’s fourth-biggest insurer by market value, report a forecast-beating 42 per cent jump in annual sales on Thursday

Global new business for the year to December 31 was £1.8bn, compared with £1.3bn the year before and ahead of analysts’ expectations of £1.69bn.

The growth was almost entirely generated in L&G’s core UK market, where sales were up 46 per cent to £1.7bn. By contrast, new business in the group’s international operations fell 4 per cent to £105m.

Dismissing concerns that its hold on the highly profitable bulk annuity market could come under fire from new entrants such as Aviva, L&G said sales in the sector – where companies pay insurers a premium for taking on their pension liabilities – rose from £877m to break the £1bn barrier mark last year.

Unlike bigger rivals Aviva and Prudential, which are developing strong foreign businesses, L&G has chosen to remain focused on the UK,

where it says pensions reform and a growing awareness of the need to save are boosting demand for its products.

In particular, the UK savings boom has rocketed sales of retail investment products such as unit trusts and investment bonds. Total sales from the division more than doubled from £315m in 2005 to £664m last year.

“Britain’s financial services industry is in good shape and Legal & General is well positioned in a number of markets which have attractive long-term growth prospects,” said Tim Breedon, chief executive, in a statement.

“We remain confident in the prospects for the UK market, with above trend economic growth and favourable demographics. Individuals are continuing to increase savings and we believe the pensions reforms will continue to support the market into 2007.”

Analysts at Merrill Lynch called the sales figures “a good end to a good year.”

“The outlook statement is confident, apart from a minor warning that protection sales may be duller this year,” wrote David Nisbet in a note to investors.

Robin Buckley, at Dresdner Kleinwort, said he continued to see L&G as one of his favoured picks within the sector, adding that he sees potential for further upside.

“Management remains confident in its outlook for the UK market in 2007 where we believe L&G will continue to prosper,” he said.

Shares in L&G, which have risen more than 26 per cent since the beginning of 2006, were up 1p at 162½p in early trade in London.

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