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L&G steering clear of consolidation despite sales fall

Legal & General has almost halved its dividend to 1.1p per share from 2p last year but has ruled out a rights issue.

The firm’s interim results on Tuesday reveal operating profit on an international financial reporting standards basis plunged by 92 per cent to £31m in the first half of this year, down from £391m in the first half of 2008.

L&G attributes the losses to reductions in quality of its corporate bond holdings.

On a European embedded value basis, operating pro- fit increased by 12 per cent to £657m, from £589m in the same period of 2008. But the firm suffered a £720m loss on ordinary activities after tax on an EEV basis, a massive fall from the £73m profit in the first half of last year.

New business sales fell to £746m annual premium equivalent for the first half, down from £806m last year.

L&G strengthened its insurance group directive surplus capital to £2.2bn in July from £1.5bn at the end of March.

Chief executive Tim Breedon says: “This company is in a very strong position. It is very difficult to envisage circumstances at the moment which would require us to raise capital.”

Breedon also suggested that L&G would not get involved in the consolidation drive expec- ted in the life sector.

He says: “There are economies of scale to be achieved but you do not get that by putting A and B together, you have to grow A organically. Ramming two small businesses together gets you two small businesses. We are cautious of the benefits of consolid- ation in most of the areas in which we operate.”

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