L&G beats forecasts with 34% jump in earnings

Legal & General has posted a 34% jump in first half earnings from £404 million to £542 million, and increased its dividend 20%.

Pre-tax profit stood at £537 million, marking a significant improvement on the corresponding period of the previous year when it suffered a loss of £143 million, measured according to IFRS standards. The results exceeded the predicted earnings increase of around £30 million from last year’s £404 million.

Net cash generation rose 19% to £58 million and overall new business rose 49% to £21.2 billion from £14.2 billion over the same period last year.

The numbers saw the insurer raise the interim dividend by 20% to 1.33p. EEV per share rose 4% at 119p from 114p as at 31 December 2009.

Tim Breedon (pictured) group chief executive said: ‘What’s pleasing to us is that all the businesses have chipped in. The international business was down [£61 million from £65 million year to date] because we have made an investment in IndiaFirst, our bancassurance joint venture.'

Sipp sales rose 7% to £60 million, representing 72% of all new individual pensions business and Sipp assets have grown to £5.2 billion.

Workplace non-profit pensions sales were up 76% to £110 million.

Breedon said the recession has encouraged people to start saving again and that the pensions industry was set to gain further from auto-enrolment and reduced promises from the public sector. The chief executive said he also looked forward to greater future workplace savings business.

‘Workplace saving will not just be about group pensions but allowing people to invest through the workplace too. This will grow significantly through auto-enrolment,’ said Breedon.

In the first half of 2010 Legal & General wrote £1 billion of new annuity business, 98% up on the second half of 2009.

Individual annuity sales rose 3% on the first half of 2009 and up 57% on the second half. However bulk annuities fell 39% on the first half of 2009, but were up 221% on the second half.

With-profits bond sales reduced year on year to £20 million from £31 million

Breedon said customers were switching from ‘old, capital heavy’ products, to ‘modern capital light products’ with two thirds of savings business in non-traditional products.