Legal & General’s operating profit tanks 2% in the fiscal first half

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Written on Aug 5, 2020

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Legal & General’s operating profit tanks 2% in the fiscal first half.
The British insurer reports a 14% decline in net cash generation.
The London-based firm will pay 4.93 pence a share of interim dividend.

Legal & General (LON: LGEN) said on Wednesday that its operating profit in the first half (H1) of the current fiscal year came in 2% lower at £1.13 billion attributed to the Coronavirus pandemic. Previously L&G expressed plans of issuing debt in June.

Shares of the company opened about 3% down on Wednesday and tanked another 1% in the next hour. At 217 pence per share, Legal & General is currently 30% down year to date in the stock market after recovering from an even lower 139 pence per share in March when the impact of COVID-19 was at its peak. Learn more about how to choose winning stocks.

L&G reports a 14% decline in net cash generation

According to CFO Jeff Davies, the company’s life insurance business remained under pressure in recent months due to COVID-19 specifically in the United States where claims surged sharply. Legal & General primarily deals in insurance and annuities products. L&G valued the additional expenses related to extra claims due to the health crisis at £80 million on Wednesday.

In its report on Wednesday, the British life insurer also highlighted a 14% decline to £730 million in net cash generation in H1. Legal & General announced its commitment to a major Edinburgh regeneration project last week.

Barclays, however, maintained its rating for L&G at “overweight” as it announced its first-half results to have topped the investment bank’s expectations.

As per Legal & General, its investment management unit reported a 4% increase in AUM (assets under management) in the first six months of the ongoing financial year to £1.24 trillion. In the league of investors United Kingdom’s stock market, L&G Investment Management is one of the largest names.

Contrary to the majority of its peers, L&G did not suspend its 2019’s final dividend in the wake of the health crisis. The company’s board also declared 4.93 pence a share of interim dividend on Wednesday that remained unchanged from last year.

JP Morgan, however, was expecting a boost in the dividend. Analysts at JP Morgan reiterated their rating of “neutral” on Legal & General’s stock on Wednesday.

Legal & General performed fairly upbeat in the stock market last year with an annual gain of more than 30%. At the time of writing, the British multinational financial services company has a market cap of £12.93 billion and a price to earnings ratio of 7.14.