Analysts expect surge in Legal & General profits

Published on Saturday 20 March 2010 12:43

INSURANCE firm Legal & General is expected to bounce back into the black and raise its final dividend this week when it presents results expected to benefit from strong cash generation.

The market expects a consensus pre-tax profit of 516 million for 2009 to have replaced a massive 1.5bn loss in 2008 when the group reports on Tuesday.

Barrie Cornes at broker Panmure Gordon said:

"This has partly been achieved by the group moving out of areas that were capital-consumptive with poor margins, such as personal pensions and bulk purchase annuities."

Cornes said L&G had instead targeted areas like group pensions, where there were better margins.

He is forecasting a 41 per cent surge in the group's final dividend to 2.89p, even though he believes the total payout for the year will be down at 4p compared with 4.06p in 2008. The City consensus for the total divi is 3.67p.

The consensus for operating profits at L&G is for a surplus of 570m compared with a 189m loss in the previous year.

In that year, there was a 50 per cent cut in the final payment – the first dividend cut by the 173-year-old company in living memory.

That was accompanied by the announcement of severe costcutting at L&G including redundancy for about one in 10 of the company's life and pensions workforce.

Chief executive Tim Breedon is expected to say that programme is well-advanced.

However, analysts say the better performance is unlikely to lead to any major re-rating of L&G's share price.

There has been speculation that Resolution Group, the industry consolidation specialists that recently took over Friends Provident, will turn its attention to the company.