LGIM’s profits slip despite AUM climb

Added 9th August 2016

Legal & General Investment Management’s profit slipped by a marginal 3% to £171m in the first half of the year versus the same period in 2015.

LGIM’s profits slip despite AUM climb

The slight drop came despite a significant 18% increase in assets under management compared to the same point last year to £841bn.

The biggest growth was seen in its international assets with the total rising 31% to £152bn.

Perhaps unsurprisingly given the Brexit-driven outflows seen across much of the industry, LGIM’s external net flows for the first half amounted to 9.6bn, down 30% from the 13.8bn recorded in 2015.

Parent company Legal & General fared better, with operating profit up 10% to £822m. Adjusted earnings per share grew 14% to 11.2p. The company declared an interim dividend of 4p per share will be paid.

The results underwhelmed the market however, with Legal & General shares sliding nearly 5% to 207p by mid-morning on Tuesday.

Group chief executive Nigel Wilson said: “We have a strong balance sheet, which gives us the flexibility and capacity to invest in support of each of our businesses. There are many different views of the outlook for economic growth, the state of financial markets and political uncertainty.”

“We reflect this in our approach to risk management. While we cannot be immune to this uncertainty, we remain confident that we will continue to deliver attractive returns for shareholders, great value to customers and better outcomes for society.”

Wilson added that he sees five long-term growth drivers for the business which are unaffected by short term issues; ageing populations, globalisation of asset markets, creating real assets, welfare reform and digital.

“Volatile financial markets can be tricky for banks and insurers in the short term, since many of their assets are linked to market investments, noted Nicholas Hyett, an equity analyst at Hargreaves Lansdown. “Legal & General appear well set with their focus on long term structural growth opportunities. However today’s mix of earnings will be a little disappointing for investors. The LGIM business, which saw revenues decline, is capital light and generates welcome recurring income, whereas annuity revenues have become lumpier as the group increasingly relies on blockbuster bulk annuity deals.”

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Alex Sebastian

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Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.



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