Legal & General Beats Estimates With First-Half Results

The headline figures were impressive for the usually pedestrian insurance sector with L&G’s operating profit up 18% at £750mln in the first half – some £58mln ahead of consensus City forecasts.

The government’s shake-up of the pensions market saw L&G’s annuities business down 62% to £1.3bn from £3.5bn over the same period past year.

L&G’s operating profit rose to 750 million pounds in the six months to the end of June from a year earlier, against a forecast of 692 million pounds in a company-supplied poll. The company said last month that it is in exclusive talks to sell its French unit to Apicil Prevoyance and has also disposed of its stake in an Egyptian life insurer and L&G worldwide in Ireland.

It appears to have been ahead of the curve by increasing sales of bulk annuities to counter the downturn of individual annuity sales, precipitated by sweeping changes that allow savers greater freedom to do what they want with their retirement pot. This involves insurers taking on the risk of all or part of a company defined benefit, or final salary, pension schemes.

Shore Capital analyst Eamonn Flanagan said: “Legal & General reported a strong set of 2015 interims with the key financial metrics better than we and the market had expected”.

Individual annuity sales were down 53 per cent in the first half of this year to £180m, compared with £383m for the first half of 2014. The insurer has also doubled its target for lifetime mortgages and now expect to write 200 million pounds of new business this year.

“Legal & General continues to deliver strong organic growth in the UK and the US from both our developing and established, market leading businesses”.

Income investors received a boost as the company raised its half-time dividend by 19% to 3.45p a share.

Meanwhile L&G said it was implementing cost savings across the business including through headcount reductions and a review of our UK and US locations and is track to deliver £80m in savings in 2015, with expected restructuring costs of £40m.

L&G shares on teh FTSE 100 index were up 5.5p to 268.9p by mid-morning.