Legal & General beats profit estimate and raises dividend amid strategic overhaul
Legal & General (L&G) has raised its dividend as its profit for the first half of 2024 exceeded expectations, after its new chief promised a “simpler” future.
The FTSE 100 insurance and pension giant reported a core operating profit of £849m for the half-year, up from £844m during the same period in 2023 and ahead of a company-compiled analyst consensus estimate of £834m.
Its total operating profit came in £920m, £4m lower than the first half of 2023. L&G said it continued to expect its core operating profit for 2024 to grow by mid-single digits year-on-year.
L&G has been making the majority of its cash in the so-called pension risk transfer (PRT) business in recent years, which involves buying up pension liabilities from corporate pension schemes.
It said on Wednesday that it wrote £1.54bn of global PRT in the first half, compared to £4.99bn during the same period in 2023 – which was a record year.
However, L&G said that despite the slower start this year, it had now written or was exclusive on £5bn and that its “pipeline for PRT is larger than ever”.
L&G announced interim dividends of 6p per share, up from 5.71p year-on-year and in line with analysts’ expectations.
However, assets under management at L&G’s investment arm fell three per cent to £1.14 trillion.
The firm said external net outflows of £28.5bn reflected UK defined benefit contribution clients adjusting their portfolios in response to improved funding ratios. Higher interest rates have made individual annuities more attractive as they pay a guaranteed income for the rest of a pensioner’s life.
L&G enjoyed record levels of retail annuity business, with £1.2bn of individual annuities coming in at more than double that of the previous year (£575m).
In a long-awaited strategy announcement in June, L&G’s new chief executive, António Simões, promised investors a “simpler” future for the firm and announced a £200m share buyback – the first in more than a decade.
Simões, who joined L&G at the start of this year, also plans to merge its two asset management arms, L&G Investment Management and L&G Capital.
“These results reflect the ongoing strength of our business, with core operating profit slightly ahead of the prior year and a solvency coverage ratio of 223 per cent,” he said on Wednesday.
“Looking ahead, we are well positioned to continue to execute our strategy with pace and ambition, delivering growth and value for all our stakeholders,” Simões continued.
L&G’s shares traded up 0.5 per cent on Wednesday morning.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “There are a lot of strings to L&G’s bow, with bulk annuities at its core, and the market looks like it’ll stay healthy over the medium term.
“The next challenge is to deliver improved performance from the refreshed Asset Management division, which will carry some execution risk.”
Updated with shares and analyst commentary