British insurer L&G profit up on pension buy-out spree

By Iain Withers

LONDON (Reuters) -Legal & General reported a 6% rise in half-year core operating profit, driven by pension buy-outs, but disappointed investors with a weaker solvency ratio as the British insurer undergoes restructuring under CEO Antonio Simoes.

The FTSE 100 insurer reported core operating profit of 859 million pounds ($1.14 billion), beating analysts' expectations, while reaffirming its financial targets.

The results were boosted in the first-half by 3.4 billion pounds worth of pension buy-outs - companies offloading their pension liabilities to insurers which is a big source of revenue for the insurance industry - more than double the prior year's tally.

However, its solvency ratio, an indicator of financial resilience, fell to 217%, down from 223% a year earlier and below estimates.

L&G shares fell 3%, having gained 14% so far this year before the earnings release.

Simoes told Reuters he was cautiously optimistic about the global economic outlook and that L&G would continue to invest strongly in the U.S., despite heightened volatility in part due to the unpredictable trade policy under President Donald Trump.

"There are areas where the valuations have come down, this is a good opportunity for us to invest for the long term," Simoes said.

Simoes' strategy has seen L&G offload non-core businesses such as its U.S. protection business and housebuilder Cala in order to focus on its core insurance and asset management units in a bid to return more cash to shareholders.

He said that the drop in L&G's solvency ratio partly reflected investor payouts and the currency impact on its U.S. assets from a weaker dollar.

The company laid out plans to expand its asset management arm last month - already the UK's largest money manager running 1.1 trillion pounds - at a time when some rival insurers such as France's AXA have scaled back or sold their fund arms.

L&G also struck a partnership with Wall Street giant Blackstone to access its private credit assets, pushing further into the booming area of investors lending to companies.

Simoes said the pipeline for pension buy-outs remained strong despite increasing competition, including new entrants such as Brookfield.

"Certainly, I don't see any slowdown," Simoes said, adding that L&G was actively pricing 42 billion pounds of potential new buy-out deals.

L&G's total operating profit, which includes non-retained businesses, fell 2% to 905 million pounds. The company proposed a 6.12 pence per share interim dividend, in line with forecasts.

($1 = 0.7516 pounds)

(Reporting by Iain Withers; Editing by Jan Harvey, Lincoln Feast and Louise Heavens)