L&G tops expectations with £940m profit as it reveals scale of accounting tweak hit
Legal & General beat market expectations this morning as it posted profits of £941m for the first six months of the year despite new accounting rules putting a dent in the insurance giant’s accounts.
In its half year results, L&G said it had delivered operating profits ahead of the £834m analysts had been expecting but down from £958m in the same period last year.
The numbers reveal the scale of the hit from new accounting IFRS rules introduced from January this year, which are expected to hamper reported profits across the industry.
Outgoing chief Sir Nigel Wilson however shrugged off the dip and said the firm “remain[s] on track to achieve our five-year ambitions and deliver attractive returns for our shareholders”.
L&G hiked its dividend five per cent to 5.71p, in line with its long term targets and said it had delivered capital generation of £5.9bn in line with its target of achieving capital generation of £8-9bn by 2024.
The firm has committed to delivering a five per cent boost in its dividend until 2024 to ease investor jitters as profits take a hit through the accounting tweaks.
L&G’s retirement business bolstered its performance in the first six months of the year with profits swelling 19 per cent £471m. The bump was offset by a hefty contraction in its asset management and retail divisions, however.
The retail arm saw profits fall 22 per cent to £230m, while L&G Investment Management profits fell sharply from £200m last year to £142m on the back of a volatile period for money managers, it confirmed in a statement to markets this morning.
Wilson has been shepherding the firm through a four year plan and is looking to arrest a slide in L&G shares which have tumbled some 18 per cent over the past year.
He will be replaced by Santander’s Europe boss, Antonio Simoes.
Investors appeared unconvinced by the update in London this morning however as shares in L&G tumbled beyond four per cent in early trading.
Analysts said some jitters could stem from a fall in its assets under management and latest wage growth data which showed the long term knock on of inflation.
The company is one of the biggest investors in the UK stock market and what may be creating disquiet is the material drop in assets under management.
“The company is one of the biggest investors in the UK stock market and what may be creating disquiet is the material drop in assets under management,” said AJ Bell investment director Russ Mould.
“This is a result of both market conditions but also net outflows. As a domestic facing stock Legal & General could also be vulnerable thanks to the latest wage growth data suggesting inflation is becoming more entrenched.”