Legal & General's first-half operating profit up 10 percent, fund unit lags

By Carolyn Cohn

LONDON (Reuters) - Lower profits in Legal & General's (LGEN.L) investment management and general insurance businesses took the shine off an overall 10 percent rise in first-half operating profit, making the insurer the largest loser in the FTSE 100 index on Tuesday.

The above-forecast rise in operating profit to 822 million pounds ($1.07 billion) was boosted by strong growth in its retirement business.

Analysts expected an operating profit of 812 million pounds, according to a company-supplied forecast.

Legal & General Investment Management's assets under management rose 18 percent to 841.5 billion pounds, after seeing external net inflows of 9.6 billion pounds.

But inflows were down 30 percent from a year earlier, and operating profit fell three percent.

LGIM was continuing to see inflows at a time when markets were challenging, Chief Financial Officer Mark Gregory told reporters on a conference call.

"It's not a shoddy effort," he said.

Profits in the division were impacted by weak markets earlier in the year, but Gregory said he expected stronger markets in the second half to help profitability.

L&G's general insurance business also saw a 26 percent drop in operating profit.

The firm's shares were down 4.4 percent to 208 pence per share at 0737 GMT.

The company said it had introduced a new formula for setting its interim dividend, at 30 percent of its 2015 full-year dividend. This brought the interim dividend to 4 pence per share, up 16 percent and against a forecast 3.68 pence.

(Reporting by Carolyn Cohn; editing by Sinead Cruise and Jason Neely)