August 7, 2019 / 6:48 AM / 3 months ago

UPDATE 2-Legal & General profits boosted by corporate pension deals

* Operating profit 1 bln stg vs 909 mln stg in H1, 2018

* Retirement unit profit up 36% to 655 mln stg

* Interim dividend 4.93 pence vs 4.6 pence in H1, 2018 (Adds detail, quotes, background, share price down)

By Lena Masri

LONDON, Aug 7 (Reuters) - Legal & General’s first-half operating profit rose 11%, driven by an increase in corporate pension deals while the British insurance group said the outlook was positive for the rest of the year.

Companies are increasingly eager to offload pension scheme liabilities to insurance companies such as L&G, which is a major player in this so-called bulk annuity market, insuring companies’ final salary pension schemes.

Britain’s third-largest insurer said it saw a strong pipeline of potential deals worth 20 billion pounds and that it had closed bulk annuity deals worth around 1 billion pounds in July.

In June, it agreed to a record 4.6 billion pound bulk annuity deal with the Rolls-Royce UK pension scheme.

“So we’re feeling good about the fundamentals of our business, not just in H2 but over the next 10 years,” said Chief Executive Nigel Wilson.

L&G has been looking to shed non-core operations and in May said it would sell its small general insurance business to Germany’s Allianz.

Wilson said L&G’s five businesses had collectively delivered strong results and that the sale would allow the company to focus on areas where it has a leading market share.

He also said the company was well-prepared for the full range of foreseeable Brexit outcomes.

L&G, one of the biggest investors in the UK stock market, said its fund arm’s assets under management rose 15% during the period to 1.14 trillion pounds, up from 985 billion pounds a year earlier, helped by net inflows from external clients of 60.3 billion pounds, up from 14.6 billion pounds last year.

“We view this as a solid set of results especially given the volume of new business in H1,” Citi analysts said in a note, flagging a ‘buy’ rating and a target share price of 2.96 pounds. “We are also encouraged by the strength of the pipeline in the UK and US,” they wrote.

L&G’s shares were down 0.8% at 0948 GMT, after a period of relative outperformance against regional rivals.

The insurer said operating profit rose to 1 billion pounds ($1.22 billion) from 909 million pounds a year earlier, boosted by a 36% increase in profits at its retirement business to 655 million pounds.

The company said its Solvency II coverage ratio - a measure of balance sheet strength - was at 171%, down from 188% last year, impacted by discounting balance sheet at lower interest rates.

The company said it would pay an interim dividend of 4.93 pence per share from last year’s 4.60 pence.

$1 = 0.8228 pounds Editing by Jane Merriman

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