Legal & General Group (L&G) is to buy New Life Home Finance (Newlife) for £5m, with the acquisition expected to complete during the first half of this year, subject to regulatory approval.
UK-based Newlife was founded in 2003 to manufacture and provide lifetime mortgages, which help homeowners to raise cash against the security of their property while continuing to own and live in their homes.
L&G has also agreed to be the sole funder of new lifetime mortgages sold by Newlife. "This mortgage funding will provide another attractive source of direct investment assets to back Legal & General annuity liabilities," L&G said.
Bernie Hickman, managing director of L&G's individual retirement business, told Insurance Asset Risk that with defined benefit pension schemes dwindling, people were entering retirement age whilst wondering how to fund that retirement. He predicted that lifetime mortgages would become an increasingly important way for people to release cash from their biggest asset – their home. According to L&G, over-60s in the UK have nearly £1.3trn in housing equity.
Hickman added that the purchase will also benefit L&G's assets. "We have £40bn of assets to pay for annuity liabilities. We invest in a well-diversified portfolio and lifetime mortgages offer fixed rate loans over a long duration. This therefore is a good way of diversifying our portfolio still further."