British insurer L&G's half-year profit tops analyst forecasts

By Iain Withers

LONDON, Aug 5 (Reuters) - British insurer Legal & General reported a forecast-topping 7% increase in core operating profit to £918 million ($1.24 billion) on Wednesday, but flagged a dip in deals for its pensions buyout business.

Analysts said L&G's results topped expectations almost across the board, but there were misses on its solvency ratio and in pension buyout volumes in the UK at £2 billion, down from about £3.3 billion the previous year in the face of intensifying competition. 

The company's shares gained 0.5% after dipping in early trading.

L&G CEO Antonio Simoes has pledged to improve performance and boost investor returns by selling non-core units and expanding its capital-light asset management and retail divisions.

Its asset-management arm grew assets to more than £1.2 trillion over the period, while the overall group raised some performance targets. Among them was growth in core operating earnings per share, now expected to exceed 6% to 9% this year. 

Simoes told Reuters the outlook for pension buyouts remained strong despite the dip in first-half business. L&G trimmed its forecast to £50 billion of deals for the wider UK market this year due to some landing in 2027 instead.

TAKEOVER SPECULATION

The Financial Times reported in May that the insurer was attracting interest from potential buyers after a period of subdued share price performance.

L&G's stock has recently enjoyed a better run and was up 16% this year prior to Wednesday's results, outperforming a 10% gain for the wider FTSE 100 blue-chip index.

"I am 100% focused on executing on what is an organic strategy," Simoes said, reiterating that the company was not considering a sale.

"I'm more in the school of under-promising and over-delivery ... I still think there's a lot to go," Simoes added.

The company's Solvency II cover ratio — a key metric of financial strength — was 201%, slightly below forecasts of 206%.

L&G Chief Financial Officer Andrew Kail said this was mainly down to taking action to hedge higher inflation, and it remained well above a target range of 160% to 190%.

($1 = 0.7429 pounds)

(Reporting by Iain Withers; Editing by David Goodman and Jan Harvey)