Operational cash generation and performance
- On target to generate £450m of net cash in 2009
Net cash generated in H1 of £302m (FY 2008: £320m)
- Cost reduction programme on track
£50m annualised cost reduction expected by year end
- IFRS operating profit £31m (H1 2008: £391m)
Result reduced by negative investment variances of £351m
- EEV operating profit £657m (H1 2008: £589m), up 12%
- New business APE £746m (H1 2008: £806m)
Sales robust – action on product mix, pricing and commissions
Improved EEV margin on UK new business
- Capital and cash flow outlook supports reduced dividend of 1.11p (H1 2008: 2.01p)
10% progression from rebased 2008 dividend
Balance sheet
- IGD surplus £1.9bn at 30 June 2009, after dividend of £65m
Excludes £0.3bn of qualifying lower tier 2 bonds issued in July
Proforma coverage ratio increased to 192% (FY 2008: 169%)
- Non profit annuity credit default provisions increased to £1.3bn (FY 2008: £1.2bn)
Available release of short term default provision retained in reserves
Aggregate provision 74bp p.a. over the run off of the portfolio (FY 2008: 68bp)
Group Chief Executive, Tim Breedon, said:
“We have made strong progress in improving our net cash generation, strengthening our balance sheet and reducing costs. Management actions in the first half ensured that Risk and Investment management remain strongly cash generative and the Savings business has turned the corner. We have strengthened the balance sheet with proforma IGD surplus at £2.2bn and we expect to realise annualised cost savings of £50m by the end of 2009. IFRS operating profit has been reduced by £351m of negative investment variances in the period.
“The Board has therefore decided to pay an interim dividend of 1.11p reflecting our growing confidence in cash generation and our continued determination to strengthen the balance sheet during the ongoing economic uncertainty while rewarding shareholders.
“Our focus remains on capital strength, net cash generation and cost reduction. As a Group we benefit and continue to exploit substantial synergies between Risk, Savings and Investment management to service our customers and create value for shareholders. Confidence has started to return to markets but we expect some continued uncertainty for the remainder of 2009. As a result of the actions we have taken in the first half of this year and will continue to take in the second half of the year, Legal & General is better positioned to take advantage of new opportunities to grow profitably as the economy recovers.”
