L&G hikes dividend 24%, eyes strong growth

L&G hikes dividend 24%, eyes strong growth

London: Life insurer Legal & General hiked its dividend by a more-than-expected 24% and said it was set for strong growth as a trend for reduced welfare provision forces consumers to save more.

“We are confident about the growth prospects for Legal & General," L&G chief executive Tim Breedon said in a statement on Thursday.

“There is consolidation in many of our markets and this further underpins our confidence that L&G will be a growing force as the welfare state retrenches and individuals increasingly look to high-quality, good value risk, savings and investment provision."

L&G, Britain’s fourth-biggest life insurer by market value, said its total dividend for 2010 would rise 24% to 4.75 pence per share, beating the 4.54 pence expected by analysts, according to a consensus forecast calculated by the company.

The higher payout came as L&G boosted cash generation by 4% to £728 million, in line with an industry-wide focus on cash aimed at dispelling investor concerns that life insurers are opaque and highly capital-consumptive.

The 175-year old insurer made a 2010 operating profit of £1 billion ($1.61 billion), down from £1.1 billion the previous year, and broadly in line with the £1.05 billion expected by analysts.

The decline reflected an increase in reserves to cover the cost of annuity customers living longer than expected, as well as a reduced capital benefit as the price of bonds used to underpin annuities rose relative to 2009.

Shares in L&G were up 1% at 0810 GMT, valuing the company at about £6.5 billion, outperforming a 0.6% rise in the FTSE 100. The stock has risen 12% since the start of the year, outperforming a 1.6% rise in the Stoxx 600 European insurance index.