- Group-wide operating profit beats expectations
- Solvency capital coverage up to 192 per cent since period end
Legal & General’s (LGEN) diversified business model proved itself in 2020, as falling profits in the group’s general insurance and long-term capital divisions were well compensated by strong outings from the asset management and life insurance arms.
Operating profits in the latter rose 10 per cent to £1.73bn, thanks to robust demand for individual retirement solutions and further North American expansion and canny cross-selling in pension risk transfer.
Exposure to long-tail life insurance products and stalling life expectancies has brought other benefits. Management “conservatively adopted an adjusted version” of actuaries’ mortality tables in the second half of the year, which led to a £102m reserve release and pushed up operating profits by 9 per cent, above consensus forecasts.
Peers Phoenix Group (PHNX) and M&G (MNG) used their full-year results to release £369m and £242m, respectively, suggesting L&G has left more for future years. That bodes well for plans to grow an already well-covered dividend by 3 to 6 per cent a year. Buy.
Last IC View: Buy, 229p, 12 Nov 2020
| LEGAL & GENERAL (LGEN) | ||||
| ORD PRICE: | 276p | MARKET VALUE: | £16.5bn | |
| TOUCH: | 276-277p | 12-MONTH HIGH: | 287p | LOW: 138p |
| DIVIDEND YIELD: | 6.4% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 159p | SOLVENCY II RATIO: | 177% | |
| Year to 31 Dec | Net premiums (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 8.7 | 1.52 | 19.7 | 14.35 |
| 2017 | 6.1 | 2.06 | 30.5 | 15.35 |
| 2018 | 10.7 | 2.13 | 30.8 | 16.42 |
| 2019 | 11.7 | 2.08 | 30.9 | 17.57 |
| 2020 | 9.4 | 1.43 | 27.0 | 17.57 |
| % change | -20 | -31 | -13 | - |
| Ex-div: | 15 Apr | |||
| Payment: | 27 May |
