Legal & General raises dividend as higher interest rates help it profit from pensions buyout boom
Legal & General (L&) has hiked its dividend after outstripping market expectations by boosting its profits by 12 per cent.
Higher profits in L&G’s pensions and life insurance segments offset lower incomes from its asset management business, LGIM, after it suffered from the impacts of market volatility.
L&G upped its dividend by five per cent, to 19.37p, as its overall operating profits increased by 12 per cent to £2.52bn.
The London financial services giant derived most of its profits from its pensions business, as it successfully capitalise on the continuing pensions buyout boom.
Profits from the company’s institutional pensions business, LGRI, jumped nine per cent, to £1.15bn, as it completed 61 pensions buyout deals worth £9.54bn.
The pensions deals saw LGRI buy-in to British Steel’s pension scheme through two deals worth a combined sum of £4.3bn, and take over Heathrow Airport’s £370m pensions scheme.
Higher interest rates have let defined benefit pensions schemes afford to be able to de-risk themselves by handing liability over to specialist insurers such as L&G.
L&G’s retail business also saw its operating profits increase by 33 per cent, to £825m, even as its life insurance business suffered from higher levels of mortality related to Covid-19.
The London’s firm’s UK insurance business increased its gross premiums as it captured a larger share of the market after benefiting from the house price boom.
The financial services giant’s asset management business, LGIM, however, saw the value of of its assets under management fall by £225bn to £1,196bn, as market volatility took its toll.
The drop in the value of LGIM’s assets saw it deliver 19 per cent lower profits, as inflation also increased the costs the division faced.
L&G chief executive Sir Nigel Wilson, who announced his retirement from the company this year, said “we have delivered another strong result in 2022, ahead of market expectations.”
Shares in L&G were up by 0.26 per cent at the time of reporting.