UK Life Insurers To Post Higher 1H Earnings, Dividends

2nd Aug 2010 13:16

By Vladimir Guevarra Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Many of the U.K.'s top life insurance companies are expected over the next three weeks to report slightly higher first-half earnings and interim dividends, boosted by cuts in costs, a focus on margins and some recovery in sales amid signs of improving financial markets, analysts said. This would be in stark contrast with the same period a year ago when life insurers posted massive drops in profits due to falls in sales and paper losses on investments when the financial crisis was still affecting major economies around the world. "The first quarter of 2010 was the first quarter of year-on-year growth in life new business sales since the first quarter of 2008. Sales rose by just 6%, however, against a weak first quarter in 2009 and we expect year-on-year growth to remain weak--in the range of 3%-5%--through the rest of 2010," Daiwa analyst Tim Proudlove said in a recent note. Legal & General Group PLC (LGEN.LN), which will report earnings Wednesday, is expected by 13 analysts to post, on average, a statutory first-half operating profit of GBP412 million, or up 2% from a restated GBP404 million operating profit from the same period a year ago. L&G is also expected to announce an interim dividend of 1.33 pence a share, up from 1.11 pence previously. In May, L&G Chief Executive Officer Tim Breedon said: "Our focus on generating cash, reducing costs, achieving higher returns on capital and modernising our product portfolio continues to deliver." L&G generated GBP179 million of cash in first quarter, 32% more than in the first quarter of 2009 and said it was "on track to deliver GBP600 million of cash this in 2010." Aviva PLC (AV.LN), which reports Thursday, is expected to post GBP1.15 billion in first-half operating profit, up 9.5% from GBP1.05 billion previously. Aviva is expected to give an update on its sharpened focus on Europe as a key growth market, a strategy that contrasts that of rival Prudential PLC (PRU.LN), which has a strong focus on Asia. After Aviva cut its first-half dividend last year by 31%, the company may raise its interim dividend this year by 5% to 9.44 pence a share, Panmure Gordon analyst Barrie Cornes said. Prudential, the U.K. 's biggest insurer on market capitalization, will report Aug. 12, and is expected by Daiwa's Proudlove to have a first-half operating profit of GBP737 million, up 7% from GBP688 million previously. The dividend is also expected to be raised by 10% to 6.95 pence a share. A higher dividend could serve to placate investors who are upset over a GBP450 million cost related to Prudential's ambitious--but failed--$35.5 billion bid for AIA Group Ltd., the Asian arm of American International Group Inc (AIG). That deal fell apart when Prudential's shareholders balked at the $21 billion they were asked to put up to help fund the takeover. Some shareholders have since called for the resignations of CEO Tidjane Thiam and Chairman Harvey McGrath, though that appears unlikely to happen soon. Proudlove said he also expects Edinburgh-based Standard Life PLC (SL.LN) to report Aug. 11 an operating profit of GBP251 million, up from GBP166 million previously. In April, Standard Life posted a better-than-expected 30% rise in first-quarter long-term savings new business sales. New CEO David Nish said then that the company "has made a strong start to 2010, with increased net inflows and a continued growth in assets. These results underline our belief that the U.K. market is a great place to do business." Besides comments on business outlook and profitability, analysts said investors will also be looking at comments on how prepared the companies are in meeting the requirements of Solvency II, a set of rules on solvency and capital being prepared by European regulators and which will be implemented in late 2012. Analysts also said it would be worth noting comments from consolidator Resolution Ltd. (RSL.LN), which reports Aug. 17, and check for clues on which company it may buy next. Resolution shareholders last month approved a GBP2.75 billion deal to buy some of French insurer AXA SA's (CS.FR) U.K. life operations, reinforcing Resolution's aim to build a dominant U.K. life insurer through the merger of several companies. The AXA operations will be merged with Friends Provident, the life insurer bought by Resolution last year for GBP1.86 billion. -By Vladimir Guevarra, Dow Jones Newswires. Tel. +44 (0) 2078429486, [email protected] (END) Dow Jones Newswires August 02, 2010 08:16 ET (12:16 GMT)