L&G shares falter despite sales success
Shares in Legal & General slipped after a 12% rise in first quarter sales fell short of City hopes.
Positive trend: L&G believes more Britons are looking to save
The company reported worldwide sales of £433m and professed itself 'very confident' about the group's prospects for 2011 and beyond.
New savings business increased by 20% to £320m in the quarter. And L&G said it was still on track to generate £700m of net cash in 2011.
However, the shares were down 3.5p at 120.3p in trading today.
L&G said that in the UK, an ageing population, increasing savings ratios, a recovering housing market and public sector cuts would continue to drive demand for its range of risk and savings products.
In its risk division, weaker annuity sales offset an increase in protection business as revenues fell 14% to £72m.
The decline reflected stronger comparative figures from a year earlier after many customers bought annuity products before the change in the minimum retirement age from 50 to 55 took effect in April 2010.
Demand for individual protection products is usually driven by the house market but L&G said its focus on non-mortgage business led to 18% growth in sales to £33m - its best quarterly performance since 2008.
Despite the impact of employment and salary uncertainties, L&G said group protection sales were up 7% on a year ago at £15m.
View from the City
Nick Raynor, investment adviser at online broker The Share Centre, said the results were disappointing.
'The company appears to be generating plenty of cash, but these uninspiring figures won't excite investors. We continue to list Legal & General as a 'hold' for investors to take advantage of the 4% dividend. 'Aviva is our preferred play within the sector as it offers attractions for both income and growth seekers.'
Investec Securities analyst Kevin Ryan said the key challenges facing Legal & General were growing its international business and diversifying its core UK product offering away from protection and savings.
He added: 'In a becalmed UK housing market, protection sales seem likely to remain difficult to achieve and the torpor enveloping the economy will not help savings sales.'
Broker Panmure Gordon retained its buy recommendation on the stock.
Analyst Barrie Cornes said: 'The shares have been one of the strongest performers in the FTSE in Q1 and we anticipate that the strong performance will continue based on its attractive valuation. We have increased our target price to 139p/share (130p).'
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