Key Takeaways
- Legal & General (LGEN) shares dropped approximately 6% Wednesday following disappointing analyst projections
- Core operating profit increased 6% to reach £1.62 billion, though fell short of expectations
- Solvency II coverage ratio declined to 210% from 232%, below analyst predictions
- Company announced record share buyback program worth £1.2 billion
- Combined shareholder distributions planned at £2.4 billion for the coming year
Legal & General reported a 6% increase in annual core profit for 2025, yet the market response was decidedly negative. Shares fell considerably as analysts highlighted underperformance against forecasts and deteriorating solvency metrics.
Legal & General Group Plc, LGEN.L
The insurer delivered core operating profit of £1.62 billion. This figure trailed analyst projections. Meanwhile, profit before tax surged 143% to £807 million — though this remained significantly below the consensus estimate of approximately £1.19 billion.
Core earnings per share climbed 9% to 20.93p, reaching the upper limit of L&G’s guided range of 6–9%. Management characterized this performance as demonstrating positive business momentum.
Nevertheless, the market reacted with a selloff. By midday trading in London, LGEN shares had declined roughly 5.7% to 243.8p — marking its steepest one-day drop in nearly a year.
The Solvency II coverage ratio presented another disappointment. The metric registered 210%, falling from the previous year’s 232%. This also underperformed analyst forecasts and represents a critical gauge of the company’s financial resilience that investors monitor carefully.
CEO António Simões dismissed the worries. He emphasized the company remained “very comfortable” with its capital strength and highlighted the £1.2 billion share buyback — L&G’s biggest ever — as evidence of management’s conviction.
“In two years, we’ve reshaped the company,” Simões stated to Reuters. He characterized L&G as “a sharper, more focused business” after completing a restructuring phase.
Capital Distribution and Operational Highlights
Planned total distributions to shareholders amount to £2.4 billion over the coming 12 months, with an ambitious £5 billion target spanning 2025 through 2027. The dividend per share growth target stands at 2%.
The pension risk transfer segment delivered robust performance. L&G underwrote £11.8 billion in global bulk annuity contracts, including £10.4 billion originating from the UK market. Workplace defined-contribution assets under administration expanded 21% to reach £114 billion.
The asset management division also demonstrated progress. Private markets assets jumped 32% to £75 billion, while average fee margins widened to 9.1 basis points.
Andreas Van Embden, analyst at Peel Hunt, described the report as “solid set of results, broadly in line with estimates at the operating level,” though he noted a 4% shortfall in net asset value attributable to investment variances.
Abid Hussain from Panmure Liberum commented the figures “look fine year-on-year but appear to have generally missed or be in line with expectations.”
Geopolitical Risk Assessment
L&G, overseeing £1.1 trillion in assets, remains vigilant regarding market dynamics. Simões noted the firm is tracking the possible market ramifications of the escalating U.S.-Israeli war against Iran, which has driven oil prices upward and heightened anxiety about the global economic trajectory.
L&G maintains substantial positions in UK government debt, where yields have climbed. Simões indicated that broader credit spreads actually enhance the company’s financial outcomes. “So we’re monitoring the impact very closely, but we’re pretty confident,” he remarked.
The insurer also identified strains in the U.S. private credit sector as an area requiring attention. Following last year’s partnership with Blackstone in U.S. private credit, Simões emphasized the company’s commitment to high-quality credit remains unchanged.
For 2026, management guidance projects core operating EPS growth will stay at the upper end of the 6–9% target range, with robust bulk annuity transaction volumes anticipated to persist.
