L&G sees risks on road to recovery as profits rise
However, the firm said it had turned in a strong performance during the first two months of the year and said shareholders were in line for a 22 per cent hike in dividends.
Chief executive Nigel Wilson, pictured below, said the firm, which bought a stake in Edinburgh-based builder Cala Homes last year, was “actively seeking” to invest its share of a £25 billion warchest that the insurance industry has pledged for infrastructure and housing projects.
L&G more than doubled its spending on direct investments last year to £2.9bn, up from £1.4bn in 2012, putting cash into projects such as the development of the new Royal Liverpool University Hospital and the purchase of a 46.5 per cent stake in Cala that valued the housebuilder at £210 million.
However, concerns over the withdrawal of stimulus measures such as the Federal Reserve’s money-printing programme could dent confidence among companies, Wilson said.
The US central bank’s move to start “tapering” the amount of cash it pumps into the economy, from $75bn (£45bn) in January to $65bn last month, sent a series of shockwaves through emerging markets.
Wilson said: “There is inherent uncertainty as the ‘monetary methadone’ of quantitative easing is withdrawn, and the possibility of further ‘butterfly-wing’ effects for emerging markets and the Eurozone.
“The single largest risk to economic progress remains the persistent backdrop of political and regulatory uncertainty, which could undermine the confidence of businesses to invest for long-term growth in the UK.”
Wilson’s comments came as L&G reported a 7 per cent increase in operating profits to almost £1.16bn for 2013, ahead of City hopes, with net cash generation rising 16 per cent to £1bn.
Assets under management at its fund management arm, Legal & General Investment Management, rose 11 per cent to £450bn.
Yesterday’s results showed the group has been reaping the rewards of the auto-enrolment programme, with workplace pensions assets surging 45 per cent to £8.7bn as the number of people enrolled into company pension schemes more than doubled to 903,000.
Eamonn Flanagan, analyst at Shore Capital, said: “We reiterate our ‘buy’ recommendation on this well-positioned business.”
L&G also revealed a £12m hit from the extreme wet weather and recent flooding across parts of the UK, but the bill is far lower than its larger home insurance rivals – Direct Line last week said it was expecting a hit of up to £90m from the storms and floods since the start of the year.
L&G’s board proposed a final dividend of 6.9p a share, to be paid on 4 June, lifting the full-year payout by 22 per cent to 9.3p.