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Legal & General profits jump 11% but shares dip as non-annuity sales fall short of market expectations

The profit jump was helped by a bulk annuity deal signed in June between the FTSE 100 insurer and engine maker Rolls-Royce

Legal & General - Legal & General profits jump 11% following bulk annuity deal from Rolls-Royce
The deal with Rolls boosted L&G’s pension risk transfer sales to £6.7bn compared to £735mln in the first half of 2018

Insurer Legal & General Group PLC (LON:LGEN) saw its first half profits jump by 11% after securing the UK’s largest bulk annuity deal with Rolls-Royce Holdings PLC’s (LON:RR.) in June.

However, the shares dipped lower on Wednesday after the firm’s business lines outside of annuities came in below market expectations, according to analysts at Hargreaves Lansdown.

READ: Legal & General wins largest UK pensions risk transfer deal from Rolls-Royce

For the six months, the FTSE 100 firm reported operating profits of £1bn, up from £909mln a year ago, with the interim dividend rising to 4.93p per share from 4.6p.

The deal with Rolls, which saw the engine maker’s pension fund transfer assets and liabilities of around 33,000 pensioners, helped boost L&G’s pension risk transfer sales to £6.7bn in the period compared to £735mln in the first half of 2018.

The company’s individual annuity sales rose 47% to £497mln, while direct investment surged 36% to £22.2bn. L&G’s assets under management were also up 15% at £1.13bn.

Looking ahead, L&G’s chief executive Nigel Wilson said the group’s second half had “started well” with a £4bn deal with Oxford University Future Cities as well as a US$50bn Japanese global index win alongside the contract with Rolls.

The CEO added that the group was “on track” to deliver an earnings per share (EPS) compound annual growth rate (CAGR) of 10% per year “out to 2020”.

Wilson also said that the group was “confident” in the resilience of its balance sheet and operations for what it said was a “foreseeable range of Brexit outcomes”.

This wasn’t enough to placate investors, however, with the shares sliding 0.9% to 243p in early trading.

Richard Hunter, head of markets at interactive investor, said that the weak reaction in the shares was “somewhat symptomatic” of L&G’s problems convincing the market of its longer term potential, adding that the stock had fallen around 6% over the last year.

He added that with the company striving to lessen its reliance on the UK market and spread its risk wider geographically, the market consensus of the shares as a ‘hold’ was “likely to remain in place”.

--Adds analyst comment and share price--

Quick facts: Legal & General

Price: 203.7 GBX

LSE:LGEN
Market: LSE
Market Cap: £12.15 billion
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