Economy Legal & General profit up 14 percent, solvency ratio weighs

Legal & General profit up 14 percent, solvency ratio weighs

The logo of Legal & General insurance company is seen at their office in central London March 17, 2008.   REUTERS/Alessia Pierdomenico
The logo of Legal & General insurance company is seen at their office in central London.

British insurer Legal & General (LGEN.L) posted a 14 percent rise in 2015 operating profit on Tuesday, in line with forecasts, but a capital position below some expectations put pressure on its shares.

Insurers are reporting solvency capital ratios for the first time under new European rules. Analysts are taking a close look at insurers’ capital buffers, even though regulators say they are hard to compare.

Legal & General said it had a solvency capital ratio under new European rules of 169 percent. A ratio of 100 percent shows insurers have sufficient capital to cover underwriting, investment and operational risks.

“This is relatively a weaker capital position within the UK life insurers,” said JPMorgan Cazenove analysts in a client note, reiterating an ‘underweight’ recommendation on Legal & General stock.

Other analysts, however, said the capital ratio was within their expected ranges.

Legal & General shares were down 4.7 percent at 231 pence by 0817 GMT, one of the worst performers in the FTSE 100 index .FTSE, and dropping from two-month highs set in the previous session.

The company reported a rise in operating profit to 1.46 billion pounds ($2.08 billion), boosted by demand for products such as lifetime mortgages and a reduction in the level of capital set aside for its annuity business.

The profit was in line with expectations from analysts in a company-supplied poll.

Net cash generation was 1.26 billion pounds, against a forecast of 1.22 billion.

Legal & General Investment Management, one of the biggest investors in the UK stock market, had assets under management of 746 billion pounds, a rise of 8 percent, after seeing external net inflows of 37.7 billion.

Legal & General said it would pay a total dividend of 13.4 pence a share, up 19 percent from 2014 and in line with forecasts.

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