Legal & General have released their full year results for 2022. The shares are barely changed in early trading, despite what Chief Executive Sir Nigel Wilson described as a strong result, ahead of market expectations.
Operating profits rose 12% to £2,523m, returns on equity edged higher to 20.7% (2021: 20.5%) and the full-year dividend was increased by 5% to 19.37p per share.
Financial strength improved further, with Solvency II capital coverage leaping from 187% to 236%.
The group has seen Pension Risk Transfer business increase once again, with L&G taking premiums of £9.5bn onto their books last year, an increase of £2.3bn.
Steve Clayton, Head of Equity Funds at Hargreaves Lansdown:
“L&G were at the heart of the gilt market meltdown back during Liz Truss’s brief occupancy of Downing Street last autumn. With Liability Driven Investment (LDI) mandates from many pension funds, L&G saw the pressures on pension funds as the gilt market tumbled in reaction to Kwasi Kwarteng’s mini-budget only too clearly. We can see the impact of bond market weakness through Legal & General’s Investment Management assets under management which fell by over £100bn to £1.2bn, despite inflows from clients of £47bn during the year.
The outlook for the group looks positive, regardless of the impact of last year’s bond market rout. The group are bringing in new assets at pace and pension funds are increasingly looking to L&G to assume their liabilities in exchange for substantial premiums. The group’s Capital business is growing strongly and has maintained asset quality at high levels to date.
The dividend is set to rise 5% this year and next, in line with the group’s stated policy. That puts L&G onto a yield of approaching 7.8%. It is rare to find businesses that can sustain that level of dividend pay-out, but in L&G’s case, the dividend is well covered by earnings and capital generation.
Bears will point to a number of one-off items that flattered these results and some will fret that without soon to retire Sir Nigel Wilson at the helm, L&G may be less successful at driving growth. But so far, the evidence points to L&G having been built for the long haul and the high solvency position bodes well, even if markets prove rocky ahead.”
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