Continued demand for 'de-risking' products among corporate pension schemes has vindicated Legal & General’s (LGEN) decision to focus on the bulk annuity market. UK bulk annuity sales during the first-half of 2017 were up £0.9bn to £1.5bn, while its retirement business also completed an £800m longevity insurance transaction.
Individual annuity sales, more than double the previous year at £345m, are also flourishing on the back of demographic and regulatory trends. With mortality rates for its annuity book well in excess of expectations, management saw fit to release £126m from its reserves. This helped bump-up retirement operating profits by more than a third £566m.
The asset management arm benefited from the popularity of liability-driven and multi-asset investment strategies among defined benefit pension schemes. External net inflows were £20.4bn, up from £9.4bn in 2016. This helped drive a 15 per cent increase in management fee revenue. The direct investment business also continued to grow its portfolio, investing a further £200m in UK housing, infrastructure and SME (small and medium-sized enterprise) finance. Infrastructure investments performed particularly well, gaining 44 per cent in value. However, the general insurance business was a weak spot; an increase in non-weather related claims dampened operating profits, which halved to £15m.
Analysts at Shore Capital expect adjusted EPS of 23.9p for the December year-end, up from 21p in 2016.
LEGAL & GENERAL (LGEN) | ||||
ORD PRICE: | 269.8p | MARKET VALUE: | £16.1bn | |
TOUCH: | 269.8-270.1p | 12-MONTH HIGH: | 280p | LOW: 204p |
DIVIDEND YIELD: | 5.4% | PE RATIO: | 10 | |
NET ASSET VALUE: | 121p | SOLVENCY II RATIO: | 186% |
Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
2016 | 5.49 | 0.98 | 11.3 | 4 |
2017 | 3.72 | 1.31 | 15.9 | 4.3 |
% change | -32 | +34 | +41 | +8 |
Ex-div: | 17 Aug | |||
Payment: | 21 Sep |