L & General’s 24 per cent dividend hike and £1bn in annual profits are a sign of just how far the insurer has come over the past two years. In early 2009, concerns over the insurer’s capital requirements caused shares to drop 30 per cent in a single day. The dividend was halved to bump up reserves, and chief executive Tim Breedon spent most of the year denying that a rights issue was imminent.
Twenty-four months later and Breedon is back in investors’ good books with yesterday’s dividend announcement, though guidance on future increases would have been even more welcome. L&G’s dependence on its core UK market also seems to have paid off – Breedon attributed the 28 per cent rise in group sales to long-term planning by prudent policy holders, and the figures support his claims. Profits on saving products were up 130 per cent to £115m, largely credited to an increase in demand for private pensions. But emerging markets growth has contributed too, with a successful Indian launch yielding more than 130,000 policy sales in its first year of trading. With China next on the list L&G is looking to consolidate international growth, and continues to diversify by growing funds in its investment management portfolio. Some brokers remain cautious, preferring Aviva’s more established international presence and steady dividend record. But today’s dip in share price can be put down to continued market uncertainty, and gives buyers an excellent opening to get in on future distributions.