L&G surprises the market with payout for shareholders

Life and pensions group Legal & General has announced a steeper-than-expected 20 per cent hike in its dividend after unveiling results that came in just ahead of analysts’ forecasts.

The UK’s fourth-largest insurer by market value posted an operating profit of £1.09 billion for 2012, up 3.2 per cent on the previous year and just above the average City forecast of £1.08bn.

The firm proposed giving shareholders a final dividend of 5.69p per share, taking the total for the year to 7.65p, up from 6.4p in 2011.

Investec analyst Kevin Ryan said the dividend hike was a “very aggressive move” as L&G’s net cash generation was broadly flat at £865m and the full effects of the retail distribution review (RDR), which banned commission payments to financial advisers at the turn of the year, remain unknown.

He added: “We expect that sources of financial advice for the mid and lower end of the market, which is L&G’s heartland, will diminish in 2013 and subsequent years as RDR squeezes IFAs out of business.”

L&G chief executive Nigel Wilson said the “uncertain, sluggish economy has had minimal impact” on the group, which enjoyed a 26 per cent rise in individual annuity sales to a record £132 million as more people reached retirement age and defined contribution pension pot sizes continued to grow.

He added: “The more important growth drivers for us are ageing populations, falling state spending on welfare and new long-term investment opportunities as banks retrench.”

Shares in the firm closed up 3.3p, or 2 per cent, at 166p.