Legal & General offices.

Legal & General issued its first insurance policy to a little-known lawyer called Thomas Smith in 1836. Nearly 200 years later, it has got the hang of how to flam up contracts with bigger-named but still low-risk customers.

On Tuesday L&G agreed a deal with ICI, the chemicals business now owned by AkzoNobel of the Netherlands, to cover £750m of its pension promises to staff, however long they live.

Can bulk annuities ever get more exciting? This is one of the biggest so-called buy-in annuity contracts signed in the UK. No matter the fall in bond yields post Brexit, which has caused most deficits in defined benefit pension schemes to soar and insurance costs to rise. L&G wants us to know that the annuity market is thriving, and its sales of annuities over the past six months are already twice the size of sales in 2015. The ICI transaction, it hopes, will encourage others to follow.

Unlikely. ICI’s retirement scheme is very unusual. The shortfall for UK schemes as a whole is nearly £1tn. The gap between ICI’s assets and liabilities is a mere £1bn. Most of its assets are gilts and bonds. Nearly all of its £11bn liabilities are hedged and bolted down, against inflation, interest rates, longevity, floods, storms, acts of God and the rest. ICI has already secured £7bn of buy-in contracts and was looking to do more when the UK voted to leave the EU.

So when bond prices rose, ICI moved swiftly to clinch the deal with L&G and shave £10m off the cost. It suited L&G, whose shares have fallen a fifth since Brexit over concerns about the economy and that the annuity market will stumble. Trustees of other pension schemes won’t be so lucky — or fleet of foot. Most of the UK’s 6,000 schemes with their £2tn of liabilities and widening deficits cannot afford the insurance even if L&G and rivals wanted to take them on. For all the flam, the bulk annuity market will remain ant-sized for a long while yet.

Cultural headwinds

The Culture Coalition is not Boy George’s new band but a bunch of business ethics watchdogs brought together by the Financial Reporting Council to opine on how boards should promote healthy corporate cultures.

Sir Win Bischoff, a former banker and FRC head, is distressed at how often weak culture sits at the heart of recent corporate failings, whether it is market manipulation, excessive pay for bosses or supplier arrangements. We know what he is talking about — Libor, Volkswagen and the like.

The FRC has just sent out a weighty tome, about six times thicker than the Brownie manual, urging boards to “connect purpose and strategy to culture”. It is easy to be cynical but it is good stuff. And the timing is apposite, within a week of the new prime minister’s words about eliminating “irresponsible behaviour in big business”.

But how do boards measure culture or assess changes? The FRC cites one arresting if unsatisfatory metric: intangible assets, such as intellectual property, customers, reputation and brand, account for four-fifths of total corporate value — against a fifth 40 years ago. But as Bob Diamond, former head of Barclays, pointed out, culture is how staff behave when no-one is looking.

The FRC is considering outlining best practice for boards. The Financial Conduct Authority ducked a similar probe into banking culture last year, on the basis that every institution was unique and it could not make comparisons.

The danger of cultural prescription may be that it becomes embedded and can’t adapt with the times. Unlike Boy George.

Snails pace

Can you name the key drivers for Royal Mail? If, even just for a moment, you thought of answering “Pat and Jess”, in reference to the van-operating cartoon postman and his black and white cat, holding shares in the privatised postal group may not be for you, writes Matthew Vincent.

If, instead, you correctly said “movements in UK gross domestic product”, then . . . holding Royal Mail shares may not be for you, either. Because, despite delivering 27m government leaflets outlining the threat to GDP growth from leaving the EU, real-life Pats and their cats now find themselves with leveraged exposure to any downturn caused by voters’ refusal to read the 16-page missives. On Tuesday, Royal Mail said: “Movements in GDP are drivers for letter and B2B parcel volumes and we are monitoring the situation.” Well it might. Analysts at Davy recalled that “management had indicated post-IPO that a 1 per cent change in [letter and parcel] revenue could impact group operating profit by 17 per cent”. Royal Mail chief executive Moya Greene assured investors that the last quarter was “traditionally a quieter trading period”. Christmas is far more important. But one rather suspects the government Christmas card list has been cut by 52 per cent.

kate.burgess@ft.com

Royal Mail: Matthew.vincent@ft.com

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