Lumpy returns are an occupational hazard for the mammoth bulk annuity market, as Legal & General’s (LGEN) first-half figures highlighted. The life assurer completed £735m in these types of transactions, less than half the prior year’s amount, pushing down the net cash released by 2 per cent to £658m – 8 per cent below consensus expectations. However, management expects new business to be weighted to the second half and is quoting on £20bn in potential deals.
After excluding last year’s £126m release from changing mortality assumptions, operating profit at the retirement business rose 9 per cent to £480m. That's thanks to earnings from its growing annuity back book, with annuity assets rising marginally to £56.4bn. The retail-side of the business received a boost from lifetime mortgages, where advances were up almost a quarter.
The investment management arm LGIM gained £14.6bn in external net inflows, down around a third on the prior year, but average assets under management still rose 4 per cent to £985bn. However, the general insurance business suffered higher claims due to adverse weather conditions earlier this year, which pushed the combined ratio – of net claims to premiums – up to a lossmaking 107 per cent, from 95 per cent a year earlier.
Analysts at Numis expect adjusted pre-tax profits of £1.7bn for the year to December 2018, giving EPS of 23.8p (from £2.1bn and 28.7p in 2017).
LEGAL & GENERAL (LGEN) | ||||
ORD PRICE: | 261.7p | MARKET VALUE: | £15.6bn | |
TOUCH: | 261.7-261.8p | 12-MONTH HIGH: | 288p | LOW: 249p |
DIVIDEND YIELD: | 6.0% | PE RATIO: | 10 | |
NET ASSET VALUE: | 129p | SOLVENCY II RATIO: | 193% |
Half-year to 30 Jun | Gross written premiums (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
2017 | 3.68 | 1.19 | 15.3 | 4.3 |
2018 | 2.76 | 0.95 | 12.3 | 4.6 |
% change | -25 | -21 | -20 | +7 |
Ex-div: | 16 Aug | |||
Payment: | 27 Sep |