Pre-tax profit attributable to shareholders in the first six months of the year fell to £942mln from £1.04bn the same period a year ago. The figures exclude last year’s release of £126mln in mortality reserves set aside for pension payments.
Mixed performance across divisions
L&G Capital, the group’s early-stage investment arm that injects new capital in housing, infrastructure and small and medium-sized businesses, saw its pre-tax profit fall 57.7% to £82mln due to a £90mln loss from the traded assets portfolio, which was hit by a weaker-than-expected market.
The investment management division saw pre-tax profit rise 4.7% to £199mln and assets under management grew 4% to £985bn, boosted by positive flows from its defined contribution, retail, defined benefit solutions and international businesses.
The L&G Retirement business posted a 6.5% fall in pre-tax profit to £565mln as the mortality rate rose and annuity sales plunged 45% to £1.1bn.
The L&G insurance division’s pre-tax profit decreased by 18.7% to £117mln on the back of higher claims, although gross written premiums increased 3% to £1.4bn. The general insurance unit was hit by claims related to adverse weather and swung to a loss of £14mln from a profit of £21mln last year.
Operating profit, however, rose 7% to £1.05bn with growth across all divisions apart from general insurance.
The Solvency II capital ratio – a measure of financial strength – increased to 193% from 186% with surplus generation up 11% to £700mln.
L&G hikes dividend
L&G raised its interim dividend to 4.6p from 4.3p last year.
The company said expects a strong second half of the year, supported by a pipeline of new business in de-risking corporate pension schemes.
Looking further ahead, the group said it was on track to deliver 10% increase in earnings per share per year out to 2020 as it focuses on “attractive high-growth markets” within investment management, investing and annuities, and insurance.
“L&G is well placed to grow further and take advantage of organic growth opportunities, bolt-on M&A, sourcing direct investments, and investing in our existing infrastructure,” it said.
“To support these plans, we will invest in technology in a measured way across the group, as previously reported.”
In late morning trading, L&G shares were down 1.1% at 261.5p
Numis repeated an 'add' rating and target price of 265p.
The broker said: "Interim results overall results are up 7% and much in line with consensus, but the results are complicated by 1/ profits from the savings business which has been sold (£56mln) and 2/ because 2017 contained a substantial mortality release (£126mln from base mortality)."
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