Insurer Legal & General scales back dividend plans, shares fall

By Carolyn Cohn

LONDON (Reuters) - Shares in Legal & General <LGEN.L> fell more than 3% on Thursday as the British life insurer kept its final dividend payment for 2020 flat due to the coronavirus pandemic and cut its dividend growth target for the next five years.

L&G has not suffered a major impact from the pandemic but executives told reporters that housing sales dropped in Britain following the country's first lockdown in March, while U.S. life insurance claims increased due to the virus. L&G is a direct investor in housing and commercial real estate.

L&G is also a major player in the market for annuities, which pay pensioners a fixed income for life. It also invests in infrastructure and is one of the largest investors in the UK stock market.

On the 2020 dividend, Chief Financial Officer Jeff Davies said: "We felt that a pause year was a good balance between rewarding shareholders - where many aren't rewarding at all - versus holding back for potential uncertainty."

L&G paid its final dividend for 2019, unlike other British insurers such as Aviva <AV.L> and RSA <RSA.L>.

L&G aims to generate eight to nine billion pounds in combined cash and capital, paying dividends of 5.6-5.9 billion pounds over 2020-2024, it said in a statement ahead of an investor day on Thursday on the group's new five-year targets.

L&G said it aimed for earnings per share to grow faster than dividend growth, which it targeted at 3-6% annually.

Barclays analysts said the dividend growth target was lower than growth of 7% seen in 2015-2019, adding the targets "fell short of our expectations." The bank retained its "overweight" rating on L&G's stock, but cut its price target to 311 pence from 320 pence.

L&G's shares were trading at 228 pence at 0938 GMT, down 3.5% and were among the worst performers in the FTSE 100 index <.FTSE>.

(Reporting by Carolyn Cohn, editing by Sinead Cruise and Jane Merriman)