Buying a back book of annuities from Aegon threw off a lot of cash for Legal & General (LGEN) during the first half. Added to its own bulk annuity sales, the £2.9bn purchase helped net cash generation increase by almost half for its retirement business to £284m. This pushed overall cash generation - vital for sustaining L&G's sizeable dividend - up 16 per cent to £727m.
L&G's retirement business signed deals that should keep the cash rolling in, including a five-year deal with Santander to offer lifetime mortgages to its customers, which management estimates will bring in an extra £100m a year in business. Equity release advances increased year on year to £231m from £31m. Unsurprisingly, individual annuity sales continued to decline.
The investment management arm gained £9.6bn in external net inflows, taking assets under management up 18 per cent to £842bn. However, fewer property deals caused a slight decline in transactional fee revenue. As a result operating profit slipped marginally to £171m. In insurance, a reduction in UK gilt yields lowered the discount rate used to calculate the reserves for its UK protection liabilities. This caused pre-tax profit for this business to fall by two-thirds to £46m.
Shore Capital expects adjusted pre-tax profit of £1.54bn at the December year-end, giving EPS of 20.6p (from £1.46bn and 19.3p in 2015).
LEGAL & GENERAL (LGEN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 205.9p | MARKET VALUE: | £12.3bn | |
| TOUCH: | 205.9-206p | 12-MONTH HIGH: | 277p | LOW: 161p |
| DIVIDEND YIELD: | 6.8% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 111p | SOLVENCY RATIO: | 158% | |
| Half-year to 30 Jun | Gross life premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 3.17 | 829 | 9.1 | 3.45 |
| 2016 | 5.49 | 984 | 11.3 | 4.00 |
| % change | +73 | +19 | +24 | +16 |
Ex-div: 18 Aug Payment: 22 Sep | ||||
