Legal & General Group (LON:LGEN) has updated investors on its half-year performance this morning.
Highlights from the company statement:
Operating profit increased 27% to £988m (H1 2016: £777m), demonstrating the continued successful execution of our strategy.
LGR delivered a 40% increase in operating profit to £566m (H1 2016: £405m) driven by strong performance from our front and back books in LGR's Corporate and Retail divisions. This was supported by continuing greater than expected mortality experience and we have chosen to reflect that in our base mortality, contributing to a release of £126m. Excluding the base mortality release, growth in operating profit remained strong at 9%.
LGIM operating profit increased by 13% to £194m (H1 2016: £171m). Management fee revenues were up 15% to £382m (H1 2016: £332m) driven by strong external net inflows of £21.7bn (H1 2016: £9.6bn), and higher asset values throughout H1 2017. This was partially offset by planned investment to grow the business in our target international markets.
LGC operating profit increased by 5% to £142m (H1 2016: £135m) driven by growth in the overall equity portfolio size within the division's £3.9bn traded assets, and continued strong performance in the £1.3bn direct investment portfolio. Direct investments delivered £69m (H1 2016: £68m) operating profit.
LGI operating profit was flat year-on-year at £151m (H1 2016: £151m). US Protection operating profit increased 33% to £57m (H1 2016: £43m) driven by business growth and favourable mortality experience. This was offset by UK Protection operating profit decreasing by 13% to £90m (H1 2016: £103m) driven by adverse experience of £26m in our group protection business, which we previously highlighted in our full year 2016 results. UK retail protection continued to generate good profits through consistent performance.
General Insurance operating profit decreased 52% to £15m (H1 2016: £31m), primarily due to higher than expected costs from non-weather related claims in Q1, predominantly escape of water, in line with wider market experience.
Mature Savings operating profit remained robust at £52m (H1 2016: £55m) as we focus on managing costs whilst maintaining customer service levels.
Profit before tax attributable to equity holders increased 41% to £1,163m (H1 2016: £826m).
Profit before tax increased on the back of the 27% increase in operating profit. In addition, positive investment and other variances contributed £175m (H1 2016: £49m), demonstrating diversification benefits across the Group. This included £52m (H1 2016: £60m) primarily from the traded assets portfolio in LGC through outperformance of long term economic assumptions, as well as profit on disposals realised in the direct investments portfolio. Additionally, consistent with prior years, there was an accounting gain driven by the Group's defined benefit pension scheme reflecting accounting valuation differences arising on annuity assets held by the scheme. These gains were partially offset by a number of smaller variances in other divisions in the Group.
In H1 2017, the Group had a net profit on disposal of £17m (H1 2016: £4m) following the sale of Legal & General Netherlands in April.
Net release from operations for retained business1 increased 6% to £724m (H1 2016: £681m), comprising £683m (H1 2016: £609m) release from operations and £41m (H1 2016: £72m) new business surplus. The prior year new business surplus, in H1 2016, benefitted in particular from the £2.9bn Aegon back-book transaction in LGR.
The base mortality release in H1 2017 resulted in an additional £100m subsidiary dividend to be remitted to the Group, contributing to a total release of £824m (H1 2016: £727m).