Legal & General Group PLC (LON:LGEN) kept its dividend flat after first-half profits were dented less than expected by the coronavirus pandemic.
The life insurer’s reported profit before tax plunged 73% to £285mln, mainly hit by the impact on the discount rate used to calculate insurance reserves.
L&G, which aims to be “a leader in the post-pandemic economic recovery” by supporting shareholders and customers and delivering “inclusive capitalism” through its investments, reported operating profits down only 3% to £1.1bn, which was better than the average analyst forecast.
These were driven by better than expected annuity earnings, 10% to £721mln, and L&G Capital earnings falling by a less than expected 30% to £123mln as building activity was paused during the lockdown at its home builder CALA.
LGIM, the asset management division, saw earnings up 2% to £196mln as increased revenues from flows and asset values were partially offset by continued investment in its growth strategy.
The Solvency 2 ratio was 173%, supported by two debt issuances in the period and up from 171% a year earlier.
Directors maintained the interim dividend at 4.93p, less than the forecast 5.23p, but investors are not likely to be too fussy when half of the FTSE 100 has cut or scrapped their payouts this year.
Earlier this year, a shareholders group warned that L&G should not pay a dividend because of the substantial bond market losses and coronavirus uncertainty it was facing.
The company expects a £200mln mortality release in the second half of the year.
Chief executive Nigel Wilson said that after delivering “resilient operating profits, a robust balance sheet and highly relevant products and services. Our ambition is for a similar performance in H2.”
“We kept all our employees on full pay, executed significant commercial and investment projects, and continued to provide a reliable service to our customers without any government financial support.”
Analysts at broker Shore Capital said they believed keeping the dividend flat “is sensible as Legal’s previous policy of circa 7% per year dividend increases was unsustainable in the current climate”.
“The dividend itself is supported by earnings, cash and underlying capital generation, but the dividend growth was not. On the current dividend of 17.57p Legal’s is yielding 8.0%.”
Shares fell 2% to 216.1p by late Wednesday morning.
UBS analysts felt it was a mixed set of results compared to consensus forecasts "although forecast risk was high and 1H20 represented a tough trading environment", seeing the below-forecast interim dividend as the likely focus for investors on the day.
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