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This insurer is a great income and value play
Thursday 15 Mar 2018 Author: David Stevenson

Legal & General (LGEN) 262.2p

Gain to date: 2.4%

Original entry point: Buy at 256p, 28 September 2017


Life insurer Legal & General’s (LGEM) full year results on 7 March made for pleasing reading for investors. The company’s operating profit rose 32% to £2.1bn for 2017 after the release of ‘mortality’ reserves. Without the release of these reserves, the profit increase would have still been an impressive 12%.

While it may appear morbid, worsening life expectancy rates are driving the company’s profits higher. Life expectancy has stalled its century long ascent due to factors such as bad diet.

This means Legal & General has to set aside less cash to pay pensions.

In 2017, the company released £332m of reserves it had previously held back to pay customers. If this trend continues, it suggests the company will have more cash to return to shareholders, increasing its income credentials.

The company boosted its 2017 full year dividend by 7% to 15.35p per share.

Legal & General is positive on the outlook for the bulk annuity market, in which insurers take on pension guarantees from corporate schemes or other insurers.

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