Life assurer Legal & General (LGEN) grew first-half operating profit by 11 per cent year-on-year to £636m, beating most analysts' expectations in the process. Moreover, that performance was achieved despite a hefty slide in individual annuity sales.
Indeed, this year's Budget-related pension reforms - which scrapped the compulsory purchase of annuities - pushed individual annuity sales down by a hefty 49 per cent to £383m. That pressure looks set to persist, too, and management expects a 50 per cent decline in individual annuity volumes for this year and next. But it's not all bad news. In bulk annuities, for instance, the group's new business premiums more than quadrupled to £3.1bn, significantly helped by a major contract win with the ICI pension fund. In fact, the group's total annuity assets jumped 20 per cent to £38.5bn and, overall, the value of the group's new business rose 32 per cent.
Meanwhile, the general insurance operation was hit with £12m of additional weather-related claims during the first quarter. But while the operation's combined ratio (of claims to premiums) deteriorated by seven percentage points, it still reached a solidly profitable 88 per cent.
Pending upgrades, JP Morgan Cazenove expects full-year EPS of 15.7p (from 15.2p in 2013) and an embedded value of 169p.
LEGAL & GENERAL (LGEN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 231.2p | MARKET VALUE: | £13.7bn | |
| TOUCH: | 231.1-231.3p | 12-MONTH HIGH: | 245p | LOW: 186p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 96p | EMBEDDED VALUE: | 166p | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pretax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 3.14 | 779 | 7.82 | 2.4 |
| 2014 | 5.29 | 740 | 8.51 | 2.9 |
| % change | +69 | -5 | +9 | +21 |
Ex-div: 27 Aug Payment: 1 Oct | ||||
