Legal & General group's direct investments shot up 35% in the first half to £6.2bn ($9.9bn) (H1 2014: £4.6bn).
Legal & General Capital (LGC), the group's main direct investment vehicle, increased operating profits by 13% to £115m ($179m) in the first half of this year (H1 2014: £102m).
Presenting its first half results, Legal & General said that this represented "the smoothed expected return on LGC assets after expenses, and equates to an assumed annualised investment return of 4.4% (H1 2014: 4.4%) on an average asset base of £5.3bn ($8.3bn) (H1 2014: £4.7bn).
L&G stressed that LGC's key objective is to invest strategically into businesses that require long-term investment, using the long-term illiquid nature of the group's liabilities and capital requirements, while providing wider benefit to the group with improved access to assets and fee revenue.
"European bank retrenchment, limited public finance and under-investment continue to provide opportunities for us in our selected areas of housing, urban regeneration, alternative finance and clean energy," the insurer added.
Among the notable points in the first half, when the L&G group overall reported an 18% rise in operating profit and an 8% rise in profit after tax, was the strong performance of the housebuilder Cala Homes, owned by L&G, and LGC's commitment of £119m ($186m) through the purchase of regeneration sites in Walthamstow and Salford, which the company intends to develop into approximately 500 homes.
"We expect to play a significant role in this sector to form a new institutional asset class and are seeing a strong pipeline of opportunities," L&G said. "We intend to bring in co-investment partners as our build-to-rent portfolio grows in H2 2015 and beyond."
LGC has also obtained full planning consent to build 1,000 houses on a 250-acre site at Crowthorne, in Berkshire, west of London, which is part of the firm's substantial strategic land bank.
LGC is also investing £240m ($374m), in partnership with Schroder UK Real Estate, for the development of a modern retail, leisure and residential complex in Bracknell town centre, close to Crowthorne.
A further £503m ($785m) have been allocated to developing a world class media hub, MediaCityUK in Salford, co-investing with the Peel Group. "We are partnering with the UK Government's Regeneration Investment Organisation (RIO) to source further projects and attract foreign investment. We will seek to allocate up to £1.5bn ($2.34bn) in similar infrastructure projects," LGC said.
On top of these projects, LGC, through its 40% investment in Pemberton Asset Management, a pan-European SME lending business, is developing a European private placement capability.
In July 2015, Pemberton announced a successful €447m ($487m) first close on its European mid-market debt fund, which brings together investors from large blue-chip financial services and insurance companies across Europe.
The total assets under management (AuM) are now €547m ($596m) as L&G continues to take advantage of the big opportunities presented by bank deleveraging.
L&G said the fund is looking to build a diversified portfolio of bilateral, club and syndicated loans to companies with turnover between €75m ($82m) and €1bn ($1.09bn) and has successfully started lending in H1 2015.
LGC is working with several potential partners to look at investing in developing renewable energy including solar and on-shore wind power. Legal & General has invested in two solar parks to date.
At Legal & General Investment Management (LGIM), total AuM increased 12% to £714.6bn ($1.115bn) (H1 2014: £640.0bn).
Total net inflows were up 25% to £12.6bn ($19.7bn) (H1 2014: £10.1bn), driven by continuing client appetite for LGIM's LDI (liability-driven investment) and real assets capabilities, active fixed-income and multi-asset strategies, and strong demand for LGIM's workplace proposition.
Index external net flows significantly improved on last year to net outflows of £1.2bn ($1.87bn) (H1 2014: £8.3bn). "This was primarily the result of better execution on our retention strategy as more clients moved to LGIM's non-index products as they executed de-risking strategies," LGIM noted. "We are also experiencing greater success in winning index mandates from international clients, many of which are expected to fund in H2 2015."
LGIM also commented that net external inflows into active fixed income of £2.3bn ($3.6bn) (H1 2014: £1.0bn) were driven by increased demand by institutional clients in the UK and continued strong demand for LGIM's credit capabilities in the US.
But net inflows into property nearly halved to £0.6bn ($0.94bn) (H1 2014: £1.1bn). Nevertheless, LGIM said it "is experiencing growing demand from international clients and the closure of the second UK Property Income Fund (PIF II) represented commitments from 16 investors from 10 countries (IAR, 4 August).
Property AuM increased 23% to £15.8bn ($24.7bn) in the first half (H1 2014: £12.8bn).
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