Legal & General: making plans with Nigel

Legal & General: The group is well placed to serve the needs ageing populations, who require financial security and planning for lengthening retirements. The Chief Executive, Nigel Wilson, has done an excellent job improving the financial track record of L&G over recent years and described these results as ‘strong’. Since joining L&G, he has switched the emphasis from old style products which only produce cash profit after many years, into areas such as fund management with nearer term cash generating abilities. This seems all the more sensible after the 2014 Budget, which has revolutionised the pensions market and made old style individual annuities passé. Indeed, Individual Annuity sales were down 49% at the half way stage, with the group forecasting further major declines. In contrast, Bulk Annuity Sales were up 368% bolstered by a huge contract for the old ICI pension scheme. The group continues to make good progress in fund management with assets under management up 7% to £465.1bn, with the US asset management business of increasing importance. In this half year net cash generation was up 13% to £567m, with the interim dividend up 21% at 2.9p. This is consistent with the guidance at the 2013 Finals to move dividend cover from 1.8x to 1.5x. This is all backed by a strong balance sheet with an IGD surplus of £4.7bn (up from £4bn at year end). Last year’s dividend was 9.3p, but if the final is up the same 20% as the interim, then 11.16p of dividend gives a yield of 4.8% at the current share price of 232p. So, overall, these are a very pleasing set of results for L&G’s shareholders.

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about.