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FTSE 100: Legal & General operating profit rises above £1bn

General view of the Legal & General headquarters office in the City of London.   (Photo by Tim Ireland/PA Images via Getty Images)
Legal & General offers pensions, life insurance and investment services. Photo: Tim Ireland/PA

Insurer Legal & General (LGEN.L) is on track to meet its financial goals after it reported an 8% jump in operating profits to £1.16bn ($1.41bn) in the first half of the year.

The London-headquartered company, which offers pensions, life insurance and investment services, said retail insurance business generated the most growth, with profits 14% higher at £332m.

“Our balance sheet is strong and highly resilient, with a solvency ratio of 212% and with 100% of cash flows received from our direct investments,” CEO Nigel Wilson said.

“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.”

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It said it remains on track to generate £8bn to £9bn of cash and capital from 2020 to 2024, achieving 22% growth in cash generation in the first half of £4.3bn.

L&G shares were flat in London on Tuesday morning.

Legal & General Investment Management, one of the biggest investors in the UK stock market, saw a large jump in third-party inflows to £65.6bn, more than double the flows seen in the first half of 2021.

But assets under management dropped 3% from a year earlier to £1.29trn. The unit's operating profit fell 2%.

The group has the ability to generate assets through its bulk annuity, or Pension Risk Transfer (PRT) business, to then be managed by other parts of the business. New business premiums for the PRT unit grew by £4.4bn on in the period from a previous £3.1bn, while the contribution from international clients continued to lessen the reliance on purely UK profits. In the Investment Management business, where international assets account for 36% of the total being managed, there were net inflows of £65.6bn,” Richard Hunter, head of markets at Interactive Investor, said.

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“In addition, the Capital unit provides exposure to alternative assets such as commercial real estate and housing, which serve to underpin the annuity business. The measure of capital strength for the company, the Solvency II Coverage Ratio, increased to 212% from 182% and enabled a further increase to the dividend, leaving the shares on a projected yield of 6.9%. The level of this yield has not only compensated for any share price weakness in terms of total return, but is also adequately covered, leaving future payments secure barring any exceptional factors,” he added.

L&G said it would pay an interim dividend of 5.44 pence per share, up 5%.

Watch: Legal & General Group ‘leaning into this recession threat’: Sir Nigel Wilson