2017 Half Year Results

09 August 2017

STRONG FINANCIAL PERFORMANCE IN H1 2017: PROFIT BEFORE TAX1 UP 41% TO £1.2BN 

FINANCIAL HIGHLIGHTS2:

  • OPERATING PROFIT UP 27% TO £988M (H1 2016: £777M)
  • PROFIT AFTER TAX UP 43% TO £952M (H1 2016: £667M)
  • EARNINGS PER SHARE UP 41% TO 15.94P (H1 2016: 11.27P)
  • INTERIM DIVIDEND3 OF 4.30P PER SHARE (H1 2016: 4.00P)
  • NET RELEASE FROM OPERATIONS FOR RETAINED BUSINESS4 UP 6% TO £724M (H1 2016: £681M)
  • RETURN ON EQUITY5 OF 26.7% (H1 2016: 20.6%)
  • SOLVENCY II SURPLUS6 INCREASED BY £1.0BN TO £6.7BN (FY 2016: £5.7BN)
  • SOLVENCY II COVERAGE RATIO6 OF 186% (FY 2016: 171%)
  • H1 2017 RESULTS INCLUDE BASE MORTALITY RELEASE7 OF £126M

BUSINESS HIGHLIGHTS:

  • LGR PRT8 NEW ANNUITY BUSINESS OF £1.6BN (H1 2016: £0.7BN)
  • LGR RETAIL9 TOTAL SALES UP 98% TO £769M (H1 2016: £389M)
  • LGIM AUM UP 13% AT £951.1BN (H1 2016: £841.5BN)
  • LGIM EXTERNAL NET INFLOWS OF £21.7BN (H1 2016: £9.6BN)
  • GROUP-WIDE DIRECT INVESTMENT UP 48% AT £11.8BN (H1 2016: £8.0BN)
  • LGI GROSS PREMIUMS UP 6% TO £1,338M (H1 2016: £1,260M)

Nigel Wilson, Group Chief Executive, said:

“L&G delivered 41% growth in EPS to 15.9p, 41% growth in profit before tax to £1.2 billion and a 26.7% Return on Equity. This includes a base mortality release of £126m as part of our review of longevity assumptions. Our consistently improving financial performance is due to: investing for the long term in our market leading businesses, excellent execution by my colleagues and delivering value for customers.

Our strategy, based around six long term macro and demographic growth drivers, not only allows us to grow L&G’s business, but also the scale of our long term capital enables us to support inclusive growth across the UK. We are replicating our successful UK model with measured expansion in the US, where we are experiencing increasing customer acceptance and an ever improving financial performance.

Our business model has proven to be resilient to political, economic and regulatory uncertainties. We are not being complacent as we recognise that there are currently some structural weaknesses in the UK economy. Notwithstanding this we have tremendous momentum across our business, a strong AA- rated balance sheet and increasing access to global growth opportunities, therefore we remain confident in our ability to deliver growth.”

  1. Represents profit before tax attributable to equity holders.
  2. The metrics within the Group’s financial highlights are defined in the glossary, which includes Alternative Performance Measures, on pages 101 to 105 in this report.
  3. A formulaic approach is used to set the interim dividend, being 30% of the prior year full year dividend.
  4. Excludes businesses disposed of comprising Legal & General Netherlands, Suffolk Life, Cofunds and IPS.
  5. Return on equity is calculated by dividing annualised profit after tax attributable to equity holders of the Company (twice the half-year number), by the average of shareholders’ equity during the period.
  6. Solvency II surplus and coverage ratio on a shareholder basis is adjusted for the Own Funds and SCR of the With-profits fund and the final salary pension schemes.
  7. IFRS impact from base mortality release in LGR’s £45.5bn of net longevity exposure.
  8. PRT (Pension Risk Transfer) represents bulk annuities bought by entities that run final salary pension schemes to reduce their responsibilities by passing the assets and obligations to insurance providers. Figures disclosed exclude back-book transactions.
  9. LGR Retail comprises the division’s individual annuities and lifetime mortgage businesses (Legal & General Home Finance).

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