LGIM nears £1trn assets after year of ‘record’ flows

Legal & General’s asset management arm neared £1trn in assets under management last year, after taking £44bn worth of external net inflows.

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External net flows of £43.5bn were up from £29.2bn in 2016, meaning the group ended the period with AUM at £983.3bn.

During the period, the FTSE 100 insurer’s investment arm also saw its operating profit increase by 9% to £400m.

Management fee revenues were up by 11% to £780m on the back of its higher external inflows.

Despite increased regulatory costs during the period, the fund group said it had maintained its “market leading cost income ratio of 50%”.

Parent company Legal & General continued to benefit from the reversal in the long-term trend of improved life expectancy. Against a backdrop of policyholders not living as long in recent years, the group delivered a “record” operating profit of £2.1bn over 2017, up 32%.

The firm also received a one-time £246m boost from US tax reform under president Trump, which has lowered the corporate income tax rate from 35% to 21%.

Excluding the £332m impact from the changes in mortality rates and other one-off items, its operating profit was only 12% higher at £1.6m and earnings per share were up just 9% at 23.10p instead of 50% higher at 31.87p.

Still, chief executive Nigel Wilson said that was enough to sustain the group’s momentum throughout 2017, adding that it was targeting a similar performance seen in 2011 to 2015, where EPS grew 10% per annum, into 2020.

“Legal & General’s strategic focus, alignment to global growth drivers and excellent execution, allowed us to deliver a record £2.1bn operating profit in 2017,” said Wilson. “Our shareholders are enjoying terrific EPS and RoE growth, while our ‘inclusive capitalism’ model ensures customers and society also benefit.

“We remain confident that our unique business model, strong management team, collaborative culture, and strategic focus can deliver further growth in 2018 and beyond.”

After dumping its mature savings business last year, L&G has been narrowing its focus on its annuities, investment management and insurance units. On the investment side, it has recently pushed into the European ETF market, acquiring platform Canvas from ETF Securities.

On the back of its results, the group said it would be hiking its full year dividend by 7% to 15.35p.

L&G’s shares opened 1.3% higher at 261.2p.

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