Pensions giant Legal & General Group PLC (LSE:LGEN) expects to deliver double-digit percentage growth in operating profit this year after a strong first half.
The first half of 2021 saw operating profit from continuing divisions rise 13% to £1.27bn from £1.12bn the year before.
Profit before tax leapt to £1.32bn from £285mln in the first half of 2020, feeding through to an increase in earnings per share to 17.78p from 4.89p.
The big improvement in profit reflected a much better performance by its investments, which increased in value by £241mln this time round, thanks to rising interest rates, after losing £661mln in the first half of 2020 when markets were in turmoil because of the pandemic.
The company has recommended an interim dividend of 5.18p, up from 4.93p.
“We're continuing to make investments that are economically, environmentally and socially valuable, in line with our long-term commitment to delivering Inclusive Capitalism and supporting the Building Back Better and Levelling Up agenda,” said Nigel Wilson, the chief executive officer.
“We are already a leading asset manager and we remain focused on continuing to scale-up our asset origination capabilities which are a unique and important component of our synergistic business model which has driven our 22% ROE [return on equity]," he added.
Karl Morris at research house Edison Group said the numbers “look ahead of consensus estimates in key lines”.
"The dividend is up 5% year-on-year in line with the company’s payout policy, supported by stronger than expected earnings - with announced EPS [earnings per share] of 17.78p higher than the consensus at 15p - and capital generation of £0.8bn alongside cash generation of £0.9bn. The group’s solvency 2 coverage ratio is also up 10pp YoY [year-on-year] to 183%, leaving the group well-positioned to weather and adverse developments in markets.
"New business premiums of £3.1bn are slightly down on H120 levels of £3.4bn, but the company noted £2bn of UK PRT [pension risk transfer] business that it has already won or is in exclusive negotiations for in H2, which is a solid start to the second half. The business continues to flag its strong credentials in ESG [environmental, social and governance] and reiterated its medium-term targets, which include that EPS should grow faster than dividends, and that cash and capital generation will significantly exceed dividends by generating £8.0bn - £9.0bn of both cash and capital and paying dividends of £5.6bn - £5.9bn,” Morris said.
Nicholas Hyett at Hargreaves Lansdown said that with the disruption caused by the pandemic fading into the rear-view mirror, “Legal & General is back to making the most of what we think is the most formidable operating model in the UK life insurance sector”.
“Strong operating results and excellent distribution have underpinned a large and growing dividend in recent years, with the stock currently offering a yield of over 7%. That’s higher than you might expect, and we think reflects some nervousness about debt levels in particular; however, the group has so far managed the balance sheet well and CEO Nigel Wilson’s decision to stick to his guns and pay a dividend last year looks like a smart one,” Hyett said.
Shares in L&G were up 2.55 at 270.3p in lunchtime trading.
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