Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

High interest rates hit Legal & General assets, shares fall

Published 15/08/2023, 08:09
© Reuters.
SAN
-
LGEN
-

By Carolyn Cohn and Eva Mathews

LONDON (Reuters) -British life insurer and asset manager Legal & General recorded a 10% drop in assets under management in the year to end June, it said on Tuesday, overshadowing a first-half operating profit beat and sending its shares lower.

High inflation and interest rates have hit asset values and investor demand, with fund managers such as abrdn also seeing assets fall.

Official data on Tuesday showed higher-than-expected wage growth in Britain, boosting the chances of further Bank of England interest rate hikes.

Legal & General Investment Management, one of the biggest investors in the UK stock market, recorded assets under management of 1.2 trillion pounds ($1.52 trillion) at end-June, and external net outflows in the first half of 12.3 billion pounds.

However, the insurer reported a forecast-beating operating profit in the same period, boosted by its bulk annuity business.

Higher UK interest rates have improved the funding positions of defined benefit, or final salary, pension schemes, enabling employers to offload pension risk to an insurer through a so-called bulk annuity more cheaply.

Outgoing Legal & General CEO Nigel Wilson described the results as "mixed" in a call with Reuters, but said the insurer was seeing "slightly more tailwinds than headwinds".

The group has named Banco Santander (BME:SAN) executive Antonio Simoes to replace Wilson, who is retiring at the end of the year.

L&G's operating profit came in at 941 million pounds, down 2% from a year earlier but well above the 834 million pounds predicted in a company-compiled consensus poll. The company said it remained on track to achieve its five-year ambitions.

Shares in the group fell as much as 4% before regaining some ground to trade 2% lower at 1240 GMT.

KBW analysts highlighted weak asset management flows, but reiterated their "market perform" rating on the stock. Jefferies analysts said some investors had expected the insurer to offer a share buyback on Tuesday.

Jefferies reiterated its "buy" rating on the stock, adding that "whilst it is not in our base case, the probability of a buyback being announced at the FY23 results is higher than ever".

L&G said it would pay an interim dividend of 5.71 pence, up 5% and in line with expectations.

© Reuters. FILE PHOTO: The logo of Legal & General insurance company is seen at their office in central London March 17, 2008. REUTERS/Alessia Pierdomenico/File Photo

British specialist insurer Just Group reported a 154% jump in first-half profit on Tuesday, also beating market estimates, boosted by bumper sales of its retirement income products and higher new business income. Its shares eased 0.24%.

($1 = 0.7878 pounds)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.