(Alliance News) - Legal & General Group PLC on Wednesday affirmed its medium-term goals but posted a profit fall for 2020 which the life insurance and financial services company put down to lower interest rates.
Pretax profit in 2020 dropped 30% to GBP1.50 billion from GBP2.16 billion. Total income fell by a quarter to GBP50.23 billion from GBP66.79 billion.
Total income includes gross premiums written, which dropped 17% to GBP12.55 billion, and net premiums earned, which were 20% lower at GBP9.37 billion. Its investment return also weighed on total income, having fallen 26% to GBP39.17 billion.
"The formulaic impact of lower interest rates on LGI and the unrealised impact of market movements" hit profits in 2020, Legal & General said.
Assets under management rose 6.9% to GBP1.279 trillion on December 31, from GBP1.196 trillion at the start of 2020.
The company's Solvency II coverage ratio reduced to 177% at the end of 2020, from 184% in 2019. A ratio of 100% means a company can meet all of its risk obligations. As at March 5, the ratio stood at 192%, according to company estimates.
"Legal & General delivered a robust and resilient performance for all stakeholders, providing stability to our people, customers and shareholders. Our balance sheet remains strong, with the Solvency II coverage ratio currently over 190%, and trading remains consistent with delivering our growth ambitions which are supported by six long term growth drivers," Wilson added.
The company maintained its full-year payout at 17.57 pence per share. For 2021, Legal & General expects its payout to grow at the "low to mid-single digits" range.
It reaffirmed its five-year plan which it initially outlined in November. Over the 2020-2024 period, L&G plans for cash and capital generation to "significantly" exceed dividends, earnings per share to grow faster than dividends, and net surplus generation to exceed dividends.
L&G aims, in total, to generate GBP8.0 billion to GBP9.0 billion both of cash and capital, and to pay GBP5.6 billion to GBP5.9 billion in dividends.
"We remain confident in our strategy and in our ability to deliver resilient, organic growth through periods of macro-volatility, supported by strong competitive positioning in attractive and growing markets," Legal & General said.
Cash generation of GBP1.54 billion and capital generation from continuing operations of GBP1.5 billion in 2020 were both consistent with L&G's goals of GBP8 billion to GBP9 billion over five years.
The company added it is "pleased" with its progress so far in 2021, despite economic uncertainty.
It has however, set aside over GBP100 million for future Covid-19 claims in 2021.
"We have provisioned for GBP110m of future Covid-19 related claims, having realised GBP76m of Covid-19-related claims during 2020," L&G added.
Legal & General shares were 0.5% lower at 280.70 pence each in London on Wednesday morning.
By Eric Cunha; ericcunha@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.