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Legal & General profits surpass expectations

Legal & General profits beat forecasts as business premiums jump by over £1bn and financial group agrees largest ever US deal

  • Legal & General revealed first-half operating profits increased by 8% to £1.16bn
  • The group attracted £4.4bn of PRT new business premiums during the first half 
  • Around £2.5bn in dividends have been declared by the firm in the past two years

Legal & General has beaten half-year earnings forecasts as new business premiums surged thanks to the insurer completing its largest ever deal in the US.

The financial services group revealed operating profits increased by 8 per cent to £1.16billion in the first half of 2022, just ahead of analyst predictions of £1.12billion.

L&G’s retail insurance operation saw the largest rise in underlying profit on the back of valuation uplifts in two fintech companies it invests in; employee benefits platform Salary Finance and end-to-end mortgage provider Smartr365.

Strong result: Legal & General revealed operating profits increased by 8 per cent to £1.16billion in the first half of 2022, just ahead of analyst predictions of £1.12billion

The firm’s retirement arm, which was responsible for just under half of total profits, was boosted by its biggest ever deal in the US involving over $550million of new pension risk transfer volumes.

Other transactions agreed during the period included one worth over £2billion with the British Steel Pension Scheme, and separate deals concerning Heathrow’s British Airports Authority and specialty chemicals manufacturer Innospec.

In total, L&G attracted £4.4billion of global PRT new business premiums during the period, compared to £3.1billion in the equivalent six months last year.

The FTSE 100 business, which also offers stock and shares ISAs and life insurance, further gained from rising interest rates and widening credit spreads helping to lower pension deficits.

Chief executive Sir Nigel Wilson said: ‘We have delivered for our institutional clients and retail customers, while generating good volumes and margins in a buoyant PRT market and continuing to scale LGC at pace.

‘We are committed to providing financial security for our customers and colleagues in a tough economic climate and remain confident in our ability to grow profits sustainably and at attractive returns over the long-term.’

Following the performance, it has hiked its interim dividend by 5 per cent to 5.44p per share, meaning the group has declared £2.5billion in dividend payments in the past two years.

As part of five-year targets announced in 2020, L&G is hoping to pay £5.6billion to £5.9billion in dividends by 2024, and generate around £8billion to £9billion of cash and capital.

L&G said it was on track to achieve or exceed these targets, even if it saw no increase in cash and capital generation between now and 2024.

Mark Crouch, an analyst at trading platform eToro, said: ‘Insurers aren’t the most glamourous or exciting of investments, but Legal & General has a lot going for it. As its half-year results show, it is profitable, growing, highly cash generative and well capitalised. 

‘On top of that, it offers one of the most generous dividend yields in the FTSE 100, making it very popular with investors who need their portfolios to generate an income.’

Legal & General Group shares were just 0.07 per cent, or 0.20p, up in early trading on Tuesday morning, meaning their value has grown by around a fifth in the past two years.