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L&G ups interim dividend, plans £300M-plus mortality reserve release

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L&G ups interim dividend, plans £300M-plus mortality reserve release

Legal & General Group PLC declared an interim dividend of 4.60 pence per share, an increase from 4.30 pence per share a year earlier despite its first-half profit attributable to equity holders dropping to £771 million from £946 million in the same period in 2017.

Group CEO Nigel Wilson said the 7% dividend increase is in line with the company's "formulaic approach." The interim dividend will be paid Sept. 27.

EPS for the half was 12.94 pence, lower than 15.88 pence a year ago. Return on equity also fell year over year to 20.3% from 26.7%.

The company said EPS dropped mainly because of a fall in the so-called investment variance, which reflects the impact of market movements on various instruments backing certain liabilities. The investment variance declined to £33 million from £175 million year over.

However, operating profit rose in five of the company's six businesses, L&G noted.

Gross written premiums decreased on a yearly basis to £2.76 billion from £3.68 billion, as did net earned premiums, to £1.89 billion from £2.81 billion. Operating profit in the retirement division rose to £480 million from £440 million, while the investment management business increased operating profit by 5% to £203 million.

The company said it expects to make a full-year release of reserves held for mortality risk, as statistics continue to show that mortality is trending higher than had previously been expected. The release is expected to be between £300 million and £400 million; L&G released £332 million in its full-year 2017 results.

First-half Solvency II operational surplus generation increased to £700 million from £600 million a year before, while net surplus generation also rose, to £600 million from £500 million.

The Solvency II coverage ratio was 193% at the end of June, up from 189% at 2017-end and 186% a year ago.

L&G said it is "on track" to achieve a similar performance through 2020 as that in 2011 to 2015, when EPS grew 10% annually.