Legal & General (L&G) has increased its expectations for the rest of the financial year, after it upped its dividend pay out for shareholders.

In the first half of the insurance and pension firm’s financial year, its operating profit reached £849m, increasing by 0.6% year-on-year.

This was ahead of analysts’ expectations of £834m earlier in the year.

However, in this time, the firm’s profit after tax dropped by 40% year-on-year to £223m.

Chief executive officer at L&G, António Simões, said: "These results reflect the ongoing strength of our business, with core operating profit slightly ahead of the prior year and a solvency coverage ratio of 223%. We continue to expect 2024 core operating profit to grow by mid-single digits year-on-year.

"We are making clear progress on delivering against our strategy, notably in the establishment of a single asset manager. We have good momentum in private markets, launching a new fund to offer diversified exposure to defined contribution pension scheme members, and establishing our affordable housing fund, leveraging pension capital to build new homes.

"These developments are important steps forward for L&G, reflecting our commitment to helping address the long-term investment needs of individuals and society, and create compelling opportunities for partners to invest alongside us to generate positive change. We are encouraged by the action being taken here in the UK to drive institutional capital towards productive assets, alongside progress on addressing structural barriers to investment, such as the planning system."

Despite drops in this profit in the first half of the year, the insurance and pensions firm increased its dividend by 5% to 6 pence per share.

This is in line with its plans to maintain 5% growth per annum in dividends per share between 2024 and 2027, and 2% per annum after this period.

It added that as of 5 August, it had bought back 40 million shares, which comprises 46% of its £200m buyback.

Senior equity analyst at Hargreaves Lansdown, Matt Britzman, added: "Record levels of retail annuity business helped push operating profit past expectations as people have been snapping up higher-rate annuity deals in anticipation of rates coming back down.

"L&G is a leader in the market and managed to increase market share over the half and plump up its own results. The pension risk business (bulk annuity) was a little soft over the half, but a surge after the period ended was welcome news. This will remain a medium-term driver of growth as pension plans look to shift their liabilities to insurance giants like L&G.

"There are a lot of strings to L&G's bow, with bulk annuities at its core, and the market looks like it’ll stay healthy over the medium term. The next challenge is to deliver improved performance from the refreshed Asset Management division, which will carry some execution risk. There’s plenty to like here; the balance sheet is strong, and total returns to shareholders are attractive with a growing dividend and ongoing buybacks too."

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