L&G cuts divi by 45%

4th Aug 2009 07:04

Insurer Legal & General tumbled Tuesday after a 92% plunge in half-year operating profit prompted a 45% cut in the dividend.European embedded value (EEV) operating profit rose 12% to £657m for the six months to 30 June, up from £589m a year ago, but it slumped to £31m from £391m on an IFRS basis.There was also an IFRS pre-tax loss of £143m versus a deficit of £44m last time.The half-year dividend has been slashed to 1.11p a share from 2.01p a year ago. Last year's final payout was halved to 2.05p.L&G blamed the drop in IFRS operating profit on a £351m write-down due to "negative investment variances", while new business APE fell to £746m from £806m.The firm said its IGD surplus, a key measure of its financial strength, grew to £1.9bn at the end of June before the benefit of £300m of qualifying lower tier 2 debt securities issued in July. The group predicts a proforma IGD coverage ratio of 192%, up from 169% at the end of the 2008 financial year."Confidence has started to return to markets but we expect some continued uncertainty for the remainder of 2009," said chief executive Tim Breedon."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." The group's cost reduction programme is on track to achieve an annualized cost reduction of £50m by year end.