Legal & General earnings beat expectations

Legal & General’s profits beat forecasts as business premiums rise by over £1bn and the financial group agrees biggest US deal ever

  • Legal & General said first-half operating profit rose 8% to £1.16 billion
  • The group received £4.4 billion in PRT new business premiums in the first half
  • Around £2.5 billion in dividends have been declared by the company over the past two years

Legal & General beat earnings forecasts for the first half as premiums on new business soared as the insurer closed its biggest deal yet in the US.

The financial services group said operating profit rose 8 percent to £1.16 billion in the first half of 2022, just ahead of analysts’ forecast of £1.12 billion.

L&G’s retail insurance business posted the largest increase in underlying earnings on valuation increases at two fintech companies in which it invests; Employee benefits platform Salary Finance and end-to-end mortgage provider Smartr365.

Strong results: Legal & General said operating profit rose 8 per cent to £1.16 billion in the first half of 2022, just above analysts’ forecast of £1.12 billion

The company’s annuity division, which accounted for nearly half of total profits, was boosted by the largest deal ever in the US, with over $550 million in new annuity risk transfers.

Other transactions agreed during the period included one involving the British Steel Pension Scheme valued at over £2 billion and separate transactions involving Heathrow’s British Airports Authority and specialty chemicals manufacturer Innospec.

Overall, L&G has attracted £4.4bn in global PRT premiums on new business over the period, compared with £3.1bn in the corresponding six months last year.

The FTSE 100 business, which also offers equity ISAs and life insurance, continued to benefit from rising interest rates and widening credit spreads, which helped narrow pension deficits.

Chief Executive Sir Nigel Wilson said: ‘We have delivered for our institutional and retail clients while generating good volume and margin in a buoyant PRT market and continuing to scale LGC at pace.

‘We are committed to providing our clients and colleagues with financial security in a challenging economic climate and remain confident in our ability to sustainably grow our profits at attractive returns over the long term.’

Post-performance, it has increased its interim dividend by 5 per cent to 5.44 pence per share, meaning the group has announced £2.5 billion in dividend payments over the past two years.

As part of the five-year targets announced in 2020, L&G hopes to pay dividends of between £5.6 billion and £5.9 billion by 2024 and generate around £8-9 billion in cash and capital.

L&G said it was on track to meet or exceed those targets, even if it didn’t see an increase in cash and capital generation through 2024.

Mark Crouch, analyst at trading platform eToro, said: “Insurers aren’t the most glamorous or exciting investments, but Legal & General has a lot to offer. As its half-year results show, it is profitable, growing, has strong cash generation and is well capitalized.

‘It also offers one of the most generous dividend yields in the FTSE 100, making it very popular with investors who need their portfolios to generate income.’

Legal & General Group stocks were up just 0.07 percent, or 0.20 pence, in early trade on Tuesday morning, meaning their value is up about a fifth over the past two years.


Legal & General earnings beat expectations

Source link Legal & General earnings beat expectations

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