Legal & General has raised its dividend after a robust first-half performance in which its profits rose above £1 billion.
The insurance group, traditionally one of the biggest dividend-payers on the London stock market, said it would return £309 million to shareholders in September, after lifting its interim distribution by 5 per cent to 5.18p.
It increased the payout after operating profits during the six months to the end of June rose by 14 per cent to almost £1.08 billion, beating expectations in the City for £999 million. The group’s solvency coverage ratio, a key gauge of an insurer’s balance sheet, measured 183 per cent, up from 173 per cent a year earlier.
Nigel Wilson, chief executive, hailed a “strong set” of results and said: “We expect to deliver double-digit growth in operating profit at the full year.”
Shares in the company rose by 7¾p, or 2.9 per cent, to 271½p.
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Legal & General was set up in London in 1836 and has grown into one of the biggest savings and pensions companies in Britain. It has a stock market value of about £16.2 billion and has been led by Wilson, 64, since 2012.
Its ability to pay dividends has been in focus since the start of the pandemic, which shook the insurance industry last year. L&G pressed ahead with the payment of its final dividend for 2019 last summer, despite a ban on payouts by the European insurance regulator.
Wilson said that the overall net impact of Covid-19 on the group in 2021 had been “relatively small”. At its insurance division, which provides life cover, it received £79 million of coronavirus-related claims during the first half, which were absorbed by the £110 million provision that had been set aside at its 2020 annual results. The claims were driven mainly by pandemic-linked deaths in the United States.
It freed up £49 million of cash at its retirement business, which manages pension savings and provides annuities, “due to the continued tragic impact of Covid-19”, which had resulted in a higher mortality rate after pensioners died earlier than had been anticipated.
In institutional retirement, it attracted £3.1 billion of pension risk transfers during the six months, taking on retirement scheme liabilities from other companies. An extra £2 billion of business had been won already or was the subject of exclusive talks for the second half of the year, it added.
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Assets at its investment management unit, the largest fund management house in Britain, increased by 7 per cent to £1.33 trillion. Net inflows rose to £27.4 billion from £6.2 billion a year earlier.
L&G has expanded significantly in recent years, with investments spanning housebuilding and infrastructure. It said that its capital investment business, which deploys customers’ pension assets to make long-term bets, had been boosted by the boom in the property market, as well as by swelling valuations in its venture capital division and at Pod Point, the electric vehicle charging business in which it holds a stake. Operating profits at the division doubled to £250 million year-on-year.
Wilson said that data centres were an area where L&G planned to invest further, as well as in venture capital. The company has one data centre in its portfolio at present.
