Legal & General profit up 12% in 2022 as rising rates boost pension business

By Geoffrey Smith

Investing.com -- Legal & General (LON:LGEN) raised its dividend and hinted at more payouts to come on, after a year in which profit rose by 12% to £2.29 billion (£1 = $1.1829).

The group said it had met its five-year target for capital generation two years ahead of schedule, with £700 million left over for strengthening the balance sheet even after dividends.

“The jaws between net capital surplus generation and the dividend are widening, providing attractive capital optionality,” the group said in a statement.

L&G’s statement underlined how rising interest rates have breathed life into its core pensions business. Rising interest rates have reduced the cost for companies to meet their future pension liabilities, making it easier for them to offload those liabilities to external managers such as L&G.

L&G said its core pension risk transfer (PRT) business had started 2023 well and said it’s “strongly positioned to capitalize on this opportunity” in its home market and is “confident” of writing at least $10B in international PRT business by 2024, led by developments in the U.S. market.

The strong performance in its pension management business helped to offset a decline in profit last year in its fund management arm, which suffered as a result of the selloffs in both bonds and equities as central banks around the world raised interest rates.

Overall, group net profit and earnings per share rose 12%, allowing the company to raise the dividend by 5% to 19.37 pence. Legal & General stock was down 1.3% at the open in London, on disappointment that it hadn’t raised the payout by more.

The group is set to lose long-serving chief executive Nigel Wilson, who is standing down after a decade at the helm. L&G said it is considering both internal and external candidates to succeed Wilson.