ii view: high yielder L&G remains bullish on prospects

Full-year results to 31 December

• Core operating profit up 6% to £1.62 billion
• Core operating Earnings Per Share (EPS) up 9% to 20.93p
• Capital cushion, or Solvency II coverage ratio of 210%, down from 217% in late June
• Final dividend of 15.67p per share
• Total dividend payment for 2025 up 2% to 21.79p per share

Guidance:

• Expects growth in full year 2026 core operating EPS to be at the top end of its three-year growth target of 6-9% 
• Continues to expect increase in annual dividend per share of 2% per annum to 2027
• New £1.2 billion share buyback programme for the 2026
• Continuing to target total shareholder returns via dividends and share buybacks of over £5 billion between 2025 and 2027
• New medium-term Solvency II coverage ratio target of between 160% and 190%

Chief executive António Simões said:

“As a sharper, more focused business, we are well-positioned to capitalise on the structural, growing demand for long-term investments and retirement income. 

“We continue to extend our market leadership in defined benefit pension risk transfer, while in Retail we are capturing the defined contribution opportunity, supported by technology, customer service and operating leverage. Our Asset Management business is at an inflection point, with our repositioning efforts and its strong synergies with our other businesses driving improving financial performance.

“We are on track to achieve the financial targets set out in our strategy; our priority now is to accelerate this momentum, maintaining discipline and delivering enhanced shareholder returns."

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ii round-up:

Legal & General Group (LSE:LGEN) is a major UK financial services company selling pensions, annuities, life assurance and other investments. The FTSE 100 company operates across three core divisions.

Institutional Retirement provides products such as Pension Risk Transfer (PRT) to companies looking to outsource their responsibility for paying retired former staff pension members under final salary or Defined Benefit (DB) pension schemes. The division is L&G’s biggest generator of operating profit at 58% in 2025. 

The Retail division offers retirement and protection products such as annuities and critical illness policies to around 12.4 million retail policyholders and workplace members. It accounted for 22% of 2025 operating profit.

Finally, the Asset Management division manages assets of around £1.2 trillion. It generated the balance of 20% of operating profit in 2025.  

For a round-up of these latest results announced on 11 March, please click here. 

ii view:

Started in 1836 by six lawyers, L&G today employs over 10,000 people. Group strategy under CEO António Simões has included sharpening the business focus with a move from five previous divisions to the current three, pushing sustainable business returns and enhancing shareholder returns. Competitors include Aviva (LSE:AV.) and the former Phoenix Group now known as Standard Life (LSE:SDLF).

For investors, competition at the group’s Asset Management business remains intense, with divisional profits flat over this latest financial year. Concerns about increased competition for PRT services offered by its Institutional Retirement via US players persists. An estimated share price-to-net asset value above the three-year average may suggest the shares are not obviously cheap, while the sale of life insurance products brings exposure to unpredictable events such as diseases and pandemics. 

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More favourably, demand for PRT services persists and including momentum from overseas. A sharpening of business focus and the merger of its former alternative asset or capital investment business into the Asset Management division, has helped improve divisional profit margins. Investment in and the use of AI is being pushed at its retail division to help engage customers more effectively and efficiently, while a planned reduction in the capital cushion over the medium term should free up cash for investments in growth opportunities while maintaining a robust balance sheet.    

In all, and despite ongoing risks, demand for pension products and a forecast dividend yield of almost 9% will likely keep investors interested in this major UK financial services company. 

Positives: 

• Diversity of both product and geographical location
• Attractive dividend payment (not guaranteed)

Negatives:

• High competition for Asset Management services
• Subject to changes in pension and insurance regulation

The average rating of stock market analysts:

Hold