Legal & General hikes dividend after cutting mortality expectations

Profits surged as the main ‘Retirement’ division won various bulk annuity deals, including from the likes of Rolls-Royce and National Grid

Legal & General Group PLC (LON:LGEN) hiked its dividend 7% after profit growth accelerated in the second half of the year thanks to record annuity business.

Operating profit from continuing divisions increased 17% to £2.5bn in 2019 as the life insurer’s four business all recorded growth.

On the back of winning various bulk annuity deals, including from the likes of Rolls-Royce and National Grid, the Legal & General Retirement arm grew profits 27% to £1.4bn, while a lowering of mortality expectations resulted in a reserve release of £155mln.

Profits at the investment management arm were up 4%, the general insurance business drove a 2% improvement, while the Legal & General Capital investment unit grew profits 13%.

With the Solvency II operational surplus generation increasing 9% to £1.6bn and the mortality reserve release, a final dividend of 12.64p was recommended to mean the full-year dividend was up 7% to 17.57p per share.

Chief executive Nigel Wilson said: “Our five growing, profitable and increasingly international businesses compete in attractive, growing markets and work together to deliver economically and socially useful customer solutions.”

Looking forward, he added: “Society’s increasing focus on net zero carbon, ESG investing and levelling up through investment in all regions plays to our strengths, creating future growth opportunities.”

Shares in L&G, which had been trading near all-time highs before the coronavirus sell-off, fell in early trading but by mid-morning on Wednesday were up almost 2% at 269.3p.

Analysts at UBS said it was a “mixed” set of results for the second half of the year, with operating earnings by division in-line with expectations but the total 9% below consensus forecasts due to higher costs and weaker General Insurance result.

Source – Proactive Investor