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Legal & General Rallies to 14-Year High on Surging Profit

Chief Executive Officer of Legal & General Group Plc, Nigel Wilson said the company is looking for small to medium-sized acquisitions, especially in the U.S., to boost earnings and enable the insurer to profit from global developments including the effects of an aging population and welfare reforms. Photographer: Chris Ratcliffe/Bloomberg
Chief Executive Officer of Legal & General Group Plc, Nigel Wilson said the company is looking for small to medium-sized acquisitions, especially in the U.S., to boost earnings and enable the insurer to profit from global developments including the effects of an aging population and welfare reforms. Photographer: Chris Ratcliffe/Bloomberg

Aug. 6 (Bloomberg) -- Legal & General Group Plc, the biggest manager of U.K. pension assets, climbed to a 14-year high after sales of annuity products and underwriting in its general insurance business helped boost first-half profit.

Operating profit rose 10 percent to 571 million pounds ($876 million) from a year ago, the London-based company said today in a statement today. The firm said that “the pipeline” for standard individual annuities remains strong,’’ after sales jumped 44 percent to 754 million pounds in the first half.

The “outlook is upbeat,” Barrie Cornes, a London-based analyst at Panmure Gordon & Co. wrote in a note to clients today, reiterating his buy recommendation. “The performance was driven by a strong non-life insurance result. Annuities, U.K. protection, legal and general investment management and savings have all benefited from increased scale.”

The stock rose 2.3 percent to 201.9 pence at the close in London, its highest level since February 1999, as the insurer boosted its interim dividend 22 percent to 2.40 pence a share. Analysts had forecast 2.28 pence for the period. The stock has surged 39 percent this year, outperforming a 22 percent advance for the FTSE 350 Insurance Index.

U.S. Acquisitions

The combined operating ratio for its general insurance unit, or claims and expenses as a percentage of premiums, fell to 81 percent in the first half from 99 percent a year earlier, indicating an improvement in underwriting. Total net cash generation surged 23 percent to 500 million pounds.

Chief Executive Officer Nigel Wilson, who took on the role in June 2012, said the company is looking for small to medium-sized acquisitions, especially in the U.S., to boost earnings and enable the insurer to profit from global developments including the effects of an aging population and welfare reforms.

The company in May completed its purchase of Cofunds Holdings Ltd., a digital savings platform, and earlier this year entered a joint venture to acquire Sottish housing developer Cala Group Ltd. from Lloyds Banking Group Plc.

It has also invested over 4 billion pounds in U.K. infrastructure which could increase to as much as 15 billion pounds, Wilson has said.

“There is a huge amount of business for sale,” said Wilson on a conference call with reporters today. “We will look to steadily build on organic growth from acquisitions over the next few years. The U.S. is a very important market for us, therefore we will be investing capital to accelerate growth in our fund management business and retirement solution business.”

The firm’s net inflows into its investment management division doubled to 8 billion pounds in the first half. Assets under management rose to 433 billion pounds from 406 billion pounds, including 39 billion pounds in assets acquired as part of the Cofunds purchase.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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