Life assurer Legal & General (L&G)'s hefty half-year dividend hike may please investors, but the group's performance looked resilient rather than impressive. Indeed, worldwide new business sales fell 3 per cent year-on-year on an annual equivalent premium basis (AEP), and embedded value operating profits dropped 28 per cent to £456m – largely reflecting significant one-off gains last year. So, amid challenging trading conditions, share price upside looks limited.
Only the risk business – covering income protection and annuity products – delivered notable growth. Operating profit there rose 15 per cent to £272m, helped by an improvement in group protection claims and growth in net cash generation. Although the savings arm did grow operating profit 7 per cent to £73m – not bad against a backdrop of investment market weakness. But the investment management unit saw operating profit rise just £2m to £119m, with assets under management up £10bn to £381bn. While the international division's profit was flat at £64m – overseas new business sales did, however, rise 24 per cent on an AEP basis.
Investec Securities expects full-year operating profit of £1.13bn, giving EPS of 13.6p (£1.06bn and 13.5p in 2011).
LEGAL & GENERAL (LGEN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 128.5p | MARKET VALUE: | £7.6bn | |
| TOUCH: | 128.5-128.7p | 12-MONTH HIGH: | 136p | LOW: 87p |
| DIVIDEND YIELD: | 5.2% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 87p | EMBEDDED VALUE: | 145p | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 2.38 | 509 | 6.13 | 1.66 |
| 2012 | 2.32 | 600 | 6.96 | 1.96 |
| % change | -3 | +18 | +14 | +18 |
Ex-div: 29 Aug Payment: 1 Oct | ||||
