Legal and General has maintained its dividend payout for the first half of 2020 after returning a “resilient” operating profit of more than £1bn.
The group’s half year results, published to the stock exchange this morning (August 5), reported operating profits of £1.13bn for the six months to June — only 2 per cent less than the same period last year, despite the turmoil caused by the coronavirus.
It announced an interim dividend of 4.93p per share, equal to last year’s payout, which L&G said would “provide flexibility” as the economic effect of the crisis became clearer and was underpinned by the group’s “strong balance sheet”.
L&G’s payout comes against a backdrop of companies slashing their dividends to shareholders and despite the Bank of England urging insurers to pay “close attention” to the need to protect policyholders and support the “real economy” throughout the crisis.
The company’s board said it “continued to pay close attention” to protecting its customers and employees but also “recognised the importance of dividend income” to shareholders, particularly in the current environment.
The group estimated the coronavirus crisis had only impacted operating profits to the tune of £130m.
L&G’s profit after tax had tumbled more significantly, from £874m in H1 2019 to £290m this year, primarily reflecting the “formulaic impact of lower interest rates” on its insurance arm.
Nigel Wilson, group chief executive, said: “Our ambition is for a similar performance in H2. We kept all our employees on full pay, executed significant commercial and investment projects, and continued to provide a reliable service to our customers without any government financial support.
“We are committed to driving forward an investment-led, climate-friendly Covid recovery incorporating the very best aspects of inclusive capitalism.”
The group’s asset management arm — Legal and General Investment Management — saw its assets under management jump 4 per cent in the first six months of 2020, driven partly by strong net flows into its defined benefit business.
LGIM’s Aum stood at £1.24bn as at June 30, up from the £1.2bn at the end of 2019.
External net flows were £6.2bn in the first half as investors piled £8bn into the UK DB and defined contribution businesses.
It said: “LGIM has leveraged its UK DB capabilities to become a leading asset manager for UK DC pension scheme clients, and is also successfully growing overseas.”
LGIM returned £467m in revenues, up 8 per cent year-on-year, while management fees also increased by 8 per cent to £458m.
Michelle Scrimgeour, chief executive of LGIM, said the business had “shown resilience” in the first six months of the year and would “continue to leverage” its core strengths looking forward.
L&G Insurance saw its profits plummet by more than a third (34 per cent) to £88m as the coronavirus prompted an increase in claims, particularly in its US business.
Its capital business, investing shareholder capital and building an “alternative asset pipeline” including houses, also saw its profits dwindle from £173m last year to £123m in 2020. L&G said this principally reflected lower profits due to a pause in the house-building market due to coronavirus.
The group’s retirement institutional arm however, which offers pension risk transfer to institutional clients, performed well, with profits up 10 per cent year-on-year to £721m.
imogen.tew@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
