7th Aug 2019 08:24
(Alliance News) - Life insurance and financial services company Legal & General Group PLC on Wednesday reported a rise in interim operating profit on record UK pension risk transfers volumes.
In the six months to June 30, L&G's pretax profit attributable to shareholders increased 12% to GBP1.05 billion from GBP942 million the year before.
L&G said its profit benefited from a net positive investment variance of GBP48 million and the disposal of L&G's stake in IndiaFirst Life Insurance Co.
"Consistent with prior years, there was an accounting gain driven by the group's defined benefit pension scheme which includes accounting valuation differences arising on annuity assets held by the scheme," the company added.
Operating profit increased 11% to GBP1.01 billion from GBP909 million a year before.
L&G upped its interim dividend by 7.2% to 4.93 pence from 4.60p the year before.
The company's solvency II operational surplus generation increased 17% in the first half to GBP800 million.
Legal & General has an estimated solvency II surplus of GBP5.9 billion over its solvency capital requirement, leading to a coverage ratio of 171% at the end of the half compared to 188% six months ago.
L&Gl's return on equity in the period was was 20.2%, marginally behind the 20.3% seen the year before.
"Legal & General's five businesses collectively delivered another strong set of results in H1 2019, with earnings per share rising 13% to 14.74p, operating profit up 11% and a return on equity of 20%," said Chief Executive Nigel Wilson.
Wilson continued: "We have a depth of management, track record and opportunities that mean all five of our businesses should contribute to future growth. The opportunity in global Pension Risk Transfer, retail retirement solutions, and defined contribution is immense and expected to continue. The sale of Mature Savings and General Insurance enables us to focus on businesses where we have leading market share and adjacent businesses where we see outstanding growth potential."
Legal & General Retirement grew its operating profit by 36% to GBP655 million, driven by profits emerging from the growing backbook, record UK Pension Risk Transfer volumes in the first half and L&G's increasing market share in individual annuities.
The division's growing annuity portfolio, up to GBP72.1 billion from GBP56.4 billion, was the main factor in the profit growth.
Within the Retirement division, Legal & General Institutional completed GBP6.68 billion of pension scheme buy-ins and buy-outs compared to GBP735 million a year before. Legal & General Retail increased lifetime mortgages by 47% to GBP497 million.
Legal & General's Investment Management division reported assets under management at the end of the half of GBP1.14 trillion, up 16% on GBP985 billion the year before. The unit reported external net flows of GBP60.3 billion, versus GBP14.6 billion last year.
The Investment Management division recorded operating profit of GBP205 million, flat on the year before. Management fee revenue increased 6.0% to GBP425 million.
Legal & General Capital increased its operating profit by 18% to GBP322 million. L&G said this reflected "continued growth in the underlying direct investments portfolio combined with a more challenging build-to-sell market". The unit's direct investment portfolio grew 32% to GBP2.6 billion.
Legal & General Insurance recorded a 13% decline in operating profit to GBP134 million. The slip was attributed to a prior-year comparator that benefited from one-off contribution of specific model refinements. L&G said the underlying UK and US protection businesses "continued to generate good levels of profit and margins remain robust".
Within the unit, Legal & General Insurance saw gross written premiums rise 7% to GBP1.41 billion.
Wilson added: "We are well-prepared for the full range of foreseeable Brexit outcomes and we remain confident in our ability to deliver Inclusive Capitalism, growing value for shareholders, customers and the broader economy."
Shares in Legal & General were 2.2% lower in London on Wednesday at 240.00 pence each.
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