Increased life expectancy of annuity policyholders is causing havoc for Legal & General's profits. The insurer recently stated that around £100m of profit would have to be foregone in order keep up with the additional burden of annuity payments. Basically, people are living longer than expected and still have to be paid their annuity income.
Recently released figures from the Government Actuaries Department on life expectancy showed that men are now more likely to live to 76 (as opposed to 71 in 1986) and women to 80 (from 77 in 1986).
The problem for insurance companies is that when annuity rates were originally given to policyholders their life expectancies were less. Good news for policyholders but not insurance companies.
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