Tuesday, 15 March 2016

Legal & General - 2015 Final Results

L&G is a large FTSE 100 company with a market cap of around £14bn employing over 8,000 people serving 10 million customers. It is responsible for investing over £500bn worldwide with operations in USA, France, The Netherlands, Egypt, India and the Gulf. However the UK still accounts for the majority of its business.

They are the UK’s leading provider of individual life insurance as well as a market leader in group protection, annuities and workplace pensions. L&G are a top 20 global asset manager and one of Europe’s largest institutional asset managers as well as being the UK’s largest investment manager for UK pension schemes.

The shares joined my portfolio for the first time in March 2014.

Legal & General has a diversified business model with ~33% of the firm’s operating profit coming from UK insurance, 23% from retirement products, 23% from investment management, 13% from investing its own capital and 7% from the company’s American operations.


The Company has today announced full year results for 2015 (part 1of 3- link via Investegate). The results show adjusted earnings up 11% to 18.58p and profits up 14%. The current P/E ratio is a modest 12.4.

The full year dividend is lifted by 19% to 14.4p (2013 11.25p). The dividend had more than doubled in size since 2011 (6.4p), with UBS earlier forecasting that growth in the distributions would have to slow to 6% a year between 2016 and 2019. The shares are currently yielding 6.2%.

International expansion should open up further opportunities for the group. Last October, L&G signed its first bulk annuity contract in the US. The US defined benefit market is four times larger than the UK and demand for de-risking solutions is growing rapidly. The deal gives L&G an important foothold in this market, and the opportunity to build its market share.

Nigel Wilson, Group Chief Executive, said:

"Over the last 4 years we have delivered sustained growth, net cash has increased 10%, EPS has increased 11% and the dividend increased by 20% on average each year.

We had already moved to a capital-lite model for UK pension risk transfer business in anticipation of the new Solvency II regime and we will use our Solvency II surplus capital of £5.5bn to continue to deliver on our strategy. We have a robust business model which has proved to be adept and resilient in dealing with fiscal and regulatory changes in our sector.  We are planning for more global economic and market volatility and are well positioned for continued pressure on pricing and changes in product mix in our industry".

Rather perversely, the share price has fallen ~5% on the announcement. As far as I can see, the results are more or less in line with expectations and I can therefore see no fundamental reason for the mark down from Mr. Market which I suspect may well be a short term blip.

I will continue to hold for the final dividend and beyond.

As always, please DYOR


  1. Ciao DIY,
    Bought some more at 2.28 today, I believe the company is solid and payout is still 1.4 which is good enough to me. I have read that the fall was mostly linked to some investments that they have been doing on pension assets that they have been buying from companies (basically buying debt at a lower "price"), but I am looking to deepen my research on those allegations (if I can find anything that is...). For what I have seen so far, numbers are good, no reason not to add more especially as we are close to ex-div in 1 month (more or less)...
    Ciao ciao

    1. Stal,

      Good to hear from you - its been a little while.

      I have seen this many times - a company posts good results and the sp is hammered...likewise a company posts awful results and the sp rises. I guess what matters is the longer term trend and the fundamentals which underpin the earnings, profits and dividends.

      I had a quick look at your blog - that's quite a portfolio you have put together in a short period of time. I hope it goes well for you.