By Iain Withers
LONDON (Reuters) -Legal & General reported a 6% rise in half-year core operating profit, driven by pension buy-outs, but disappointed investors with a weaker solvency ratio as the British insurer undergoes restructuring under CEO Antonio Simoes.
The FTSE 100 insurer posted core operating profit of 859 million pounds ($1.14 billion), beating analysts’ expectations, while reaffirming its financial targets.
However, its solvency ratio, an indicator of financial resilience, fell to 217%, down from 223% a year earlier and below estimates. Analysts at Jefferies said the metric missed forecasts despite excluding units earmarked for sale.
L&G shares fell 3% in early trading, having gained 14% so far this year before the earnings release.
Simoes’ strategy has seen L&G offload non-core businesses such as its U.S. protection business and housebuilder Cala in order to focus on its core insurance and asset management units in a bid to return more cash to shareholders.
The company laid out plans to expand its asset management arm last month – already the UK’s largest money manager running 1.1 trillion pounds – at a time when some rival insurers such as France’s AXA have scaled back or sold their fund arms.
L&G also struck a partnership with Wall Street giant Blackstone to access its private credit assets, pushing further into the booming area of investors lending to companies.
The company said on Wednesday that the pipeline for pension risk transfers – companies selling their pensions liabilities to insurers, which has proven a key growth engine for the industry – remained strong despite increasing competition.
The company struck 3.4 billion pounds worth of such deals in the first half of the year, more than double the prior year.
L&G’s total operating profit, which includes non-retained businesses, fell 2% to 905 million pounds. The company proposed a 6.12 pence per share interim dividend, in line with forecasts.
($1 = 0.7516 pounds)
(Reporting by Iain Withers; Editing by Jan Harvey, Lincoln Feast and Louise Heavens)
