LONDON (Reuters) - Insurer Legal & General (LGEN.L) said first-half operating profit rose 7 percent, buoyed by gains across all units except weather-hit general insurance, and it expected to end the year even more strongly.
Sales of individual retirement products helped drive performance in the first six months of the year, while sales to companies looking to de-risk their pension schemes would bolster earnings into year end.
L&G has flagged selling so-called ‘bulk annuities’ to companies as a key plank of its growth strategy, tapping into a growing desire on the part of most company finance directors to shift pension liabilities off their balance sheet.
It said it had agreed deals to cover 1.1 billion pounds of bulk annuity risk in the first six months, but was bidding for a further 20 billion pounds of business in the second half and was in exclusive talks for 7 billion pounds in deals.
“We’ve never had an order book or a pipeline so big for our businesses, ever,” Chief Executive Nigel Wilson told Reuters.
“If you look at pension risk transfers, we’re expecting to close over 7 billion just in the second half of the year. It was only a few years ago that we used to do a billion a year.”
Operating profit across its businesses was 1.059 billion pounds ($1.36 billion) for the period to end-June, it said in a statement, broadly in line with consensus and helping underpin an interim dividend of 4.6 pence a share.
The company’s biggest unit, Legal & General Retirement, saw operating profit rise 9 percent to 480 million pounds, while its fund arm, Legal & General Investment Management, saw operating profit increase 5 percent to 203 million pounds.
Pretax profit fell to 942 million pounds from 1.0376 billion pounds, however, after market volatility weighed on the performance of its investment portfolio.
Less optimistic forecasts for longevity among the general population would also likely see a bigger than expected year-end release of reserves of the capital L&G had put aside to pay out retirement income, it said.
“People have been dying, sadly, a lot quicker than anybody expected, so we’ve got a substantial release coming,” Wilson said.
Bernstein analyst Edward Houghton said the results were in line with his expectations, but an expansion of the potential mortality release from 330 million pounds to up to 400 million pounds, as well as the bulk annuity outlook, were positives.
At 0757 GMT, shares in L&G were down 0.6 percent, in line with the broader FTSE 100 .FTSE.
Reporting by Simon Jessop; editing by Silvia Aloisi, Carolyn Cohn and Emelia Sithole-Matarise