Legal & General’s (L&G) profit for the six months to June slumped two-thirds as the insurance giant cited the “unprecedented impact” of the pandemic on its balance sheet.
Profit after tax plunged 67 per cent to £290m, down from £874m year on year.
Operating profit sank six per cent to £946m, down from £1.01bn in the same period last year.
Earnings per share slumped 66 per cent from 14.74p to 4.89p, which the group said provided “flexibility as the economic effect of Covid-19 becomes clearer”.
The financial services firm said it took a hit of £129m in Covid-related expenses.
However, L&G saw brighter results in other divisions, with three out of five businesses delivering growth.
L&G Retirement’s operating profit grew 10 per cent from £655m last year to £721m in June.
Its Investment Management division saw operating profit rise two per cent in the six months to June, up from £192m in 2019 to £196m this year.
The insurance giant also said it will pay out a dividend to shareholders of 4.93p at this interim stage — identical to last year’s dividend.
Shares were down 2.5 per cent to 214.7p at 9.45am.
Why it’s interesting
L&G was quick to defend its half-year results today, describing its balance sheet as “robust”.
In a statement, the company said: “Covid-19 is having an unprecedented impact on our customers, employees and society at large. Legal & General continues to support all of our stakeholders and we have done everything we can to help our customers through this difficult period without relying on direct government funding.”
L&G paid out £80m of extra claims due to the pandemic, but the “tragically disproportionate” amount of deaths amongst older generations meant the company saved £32m in retirement payments.
Legal & General Insurance (LGI), which provides life insurance, critical illness cover and payment protection, saw operating profit fall 34 per cent to £88m during the period.
LGI said the slump was due to increased insurance claims from customers suffering from Covid-19 in the US. It also paid out claims of £939m during the year to customers with income protection policies.
Legal & General Capital (LGC),which invests from the company’s balance sheet into early stage projects key in the UK economy, saw operating profit sink 29 per cent to £123m in the first half of 2020, which it blamed on the pause in housebuilding during lockdown.
The financial services firm stoked criticism at the start of the outbreak when it continued giving out dividends despite regulators suggesting insurers hold on to capital as the pandemic began.
But chief executive Nigel Wilson said the strength of L&G’s business demonstrated it had plenty of room to keep paying dividends. “Where we could perform, we did perform,” he said.
While it will continue closely monitoring the effects of the pandemic, L&G said it was confident its businesses would “continue to deliver profitable growth into the future as we execute our strategy based on inclusive capitalism”.
What L&G said
Nigel Wilson, L&G chief executive, said:
“Legal & General delivered resilient operating profits, a robust balance sheet and highly relevant products and services.
“Our ambition is for a similar performance in the second half of 2020. We kept all our employees on full pay, executed significant commercial and investment projects, and continued to provide a reliable service to our customers without any government financial support.
“We are committed to driving forward an investment-led, climate-friendly Covid recovery incorporating the very best aspects of Inclusive Capitalism.”