As a stake in a financial services firm with £1.14 trillion of assets under management, shares in Legal & General (LGEN) tend to move with sentiment. Indeed, with a beta score of 0.96, their 12-month performance is almost precisely in line with a market that has suffered in recent days. Half-year results do not mirror that pessimism.
For one, it’s clear to see why chief executive Nigel Wilson views the opportunities in global pension risk transfer, retail retirement solutions and defined contributions pensions to be “immense and expected to continue”. In the six months to June, sales in pension risk transfer climbed 10-fold to £6.67bn, thanks in part to a mega-annuity deal with Rolls-Royce. Individual annuity sales leapt 47 per cent to £497m.
The rest of the business isn’t faring too badly, either. Powered by index flows from Asian clients, assets under management climbed 15 per cent, while L&G appears to have no shortage of homes for its direct infrastructure investments. The group’s retirement division originated £2.4bn of new investments in the period, supporting a key pillar of the group’s strategy to support bulk annuity pricing. Signs are encouraging: operating profits here also climbed 36 per cent year on year to £655m.
One disappointment was the balance sheet, where lower interest rate assumptions and dividend payments again knocked the solvency II ratio. Second-half earnings will also have to improve to meet full-year consensus forecasts of 33p a share (and 32.7p in 2020).
| LEGAL & GENERAL (LGEN) | ||||
| ORD PRICE: | 243p | MARKET VALUE: | £14.5bn | |
| TOUCH: | 242.6-243p | 12-MONTH HIGH: | 292p | LOW: 222p |
| DIVIDEND YIELD: | 6.9% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 147p | SOLVENCY II RATIO: | 171% | |
| Year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 2.56 | 0.96 | 13.0 | 4.60 |
| 2019 | 8.75 | 1.06 | 14.7 | 4.93 |
| % change | +241 | +11 | +13 | +7 |
| Ex-div: | 15 Aug | |||
| Payment: | 26 Sep |
