Legal & General’s (LGEN) chief executive, Nigel Wilson, said the group’s half-year returns demonstrated “resilient operating profits, a robust balance sheet and highly relevant products and services”. Well, there has been no obvious deterioration in its asset base since the year-end, with no defaults on the traded credit portfolio and lower downgrades on sub-investment grade assets than anticipated. The relevance of its product offering is largely subjective, but a 2 per cent decline in continuing operating profits does point to a certain steadfastness, although the life insurance and annuities heavyweight is comprised of many moving parts.
L&G Capital performed better than expected, while annuity earnings also held up to a large degree. But reported earnings collapsed as falling interest rates undermined the discount rate used to calculate insurance reserves, resulting in a £483m negative impact.
The lockdown has had numerous ill-effects on performance, including a sharp reduction in mortgage volumes, leading to a hiatus in housebuilding activity, increased volatility in asset markets, and the inevitable rise in life claims linked to the virus. The final bill has been estimated at £129m, but there are already signs that trading conditions have become more supportive, although the interest rate environment is likely to remain moribund this side of a spike in inflation.
Consensus estimates point to adjusted EPS of 28.11p, rising to 29.93p in 2021.
|LEGAL & GENERAL (LGEN)|
|ORD PRICE:||218p||MARKET VALUE:||£13bn|
|TOUCH:||218-218.2p||12-MONTH HIGH:||325p||LOW: 138p|
|DIVIDEND YIELD:||8.1%||PE RATIO:||10|
|NET ASSET VALUE:||149p||SOLVENCY II RATIO:||173%|
|Half-year to 30 June||Net premiums (£bn)||Pre-tax profit (£bn)||Earnings per share (p)||Dividend per share (p)|