Legal and General sees profit dip as coronavirus threatens outlook

Legal and General Group's annual profit fell and missed estimates as the UK's biggest life insurer and investment manager deals with an uncertain outlook from the coronavirus outbreak.

The UK’s biggest life insurer and investment manager said pretax profit fell to £2.11 billion. The average estimate from a group of seven analysts forecast pretax profit at £2.23 billion, according to a Bloomberg survey.

The virus threatens a double blow against the sector as the bond yields and equity valuations that firms rely on for returns have fallen in response to the threat, while the likelihood of increased payouts in life and other insurance policies rises. The firm’s shares plunged 17 per cent last week, more than the FTSE 100 benchmark, as investors worried about the cost of coronavirus claims.

“The outlook for the global economy, while showing tentative signs of improvement, continues to be that of relatively low growth,” the firm said in a statement on Wednesday. The virus outbreak could temporarily impact global growth rates as well as the value of investment assets, and had driven a return to more volatile markets in the current quarter, it said.

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Economic growth

Operating profit rose 12 per cent for the year to £2.1 billion, while net income was unchanged at £1.8 billion, according to the statement.

The virus, which originated in central China and has infected 90,000 people worldwide and left more than 3,000 people dead, has also threatened economic growth. The OECD on Monday cut its full-year global growth prediction to 2.4 per cent from 2.9 per cent, which would be the weakest since 2009. On Tuesday, the US Federal Reserve delivered an emergency half-percentage point interest rate in a bid to shore up confidence in the economy.

The insurer’s asset management unit, Legal and General Investment Management, reported an 18 per cent rise in assets to £1.2 trillion. Dividend payout to shareholders rose by 7 per cent to 17.6 pence per share, in line with estimates from analysts surveyed by Bloomberg. Solvency II coverage ratio fell 4 percentage points to 184 per cent from 188 per cent a year previously. Earnings per share rose 16 per cent to 28.7 pence. – Bloomberg