Sales of protection policies hit by housing turmoil and CGT change

Fri, 25 Apr 2008

The third largest insurer in the UK, Legal and General, said sales of individual protection products are expected to fall by up to 10 per cent as a result of the weakening housing market.

Sales of protection policies, which pay out when individuals lose their job or become ill and subsequently cannot afford their mortgage, fell by 14 per cent to £36 million in the first quarter on an Annual Premium Equivalent basis. However, an exclusive distribution deal with Nationwide should help increase its market share said Legal.

Chief executive Tim Breedon commented: "The first quarter was pretty much in line with the fourth quarter, despite further deterioration of conditions in the housing market."

The insurer also suggested that the new Capital Gains Tax (CGT) rules were to blame for sales of its unit-linked bonds falling from £74 million to £40 million. Plans by the government to scrap 10 per cent taper relief and introduce an 18 per cent flat rate of CGT have made insurance bonds less tax-efficient than unit trusts .
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