FTSE 100 insurance giant’s operating profit rises 6% but falls short of analyst forecasts
Legal & General’s share price declined in early morning trading as the asset management and insurance giant’s restructuring was overshadowed by weaker-than-expected profits, reports BritPanorama.
Shares fell by 5.5% to 244p on Wednesday after the core operating profit of £1.62bn failed to meet analysts’ expectations of £1.65bn, leading to disappointment among investors, despite a six percent increase in profits.
The FTSE 100 firm announced a £1.2bn share buyback scheme, along with a two percent growth in dividend per share, resulting in planned shareholder returns amounting to £2.4bn.
Pre-tax profit rose to £807m, with earnings per share increasing by nine percent to 20.9p. The board proposed a dividend of 21.7 pence, as reported by City AM.
L&G’s institutional retirement division secured £11.8bn in global pension risk transfer business, including £10.4bn within the UK, solidifying the group’s leading position in the market, while expressing confidence in a healthy pipeline.
The group’s asset management operations reported modest growth in assets under management (AUM), totaling £1.2 trillion, with private markets contributing £75bn—a 32 percent rise—driven by expansion in private credit, infrastructure, and real estate.
Confidence in achieving asset management profit targets of £500m to £600m by 2028 remains strong, amid a transition to higher margin products. Assets under administration (AUA) for workplace defined contribution pension schemes soared 21 percent to £114bn, as net flows increased from £6.0bn to £6.2bn.
Platform membership reached 5.8m, with an additional £3.7bn in assets expected to be onboarded within the current financial year.
Richard Hunter, head of markets at Interactive Investor, remarked that the longer-term outlook for the savings and investment market appears favourable, especially in light of ageing demographics and potential welfare reform, with a growing demand for retirement income serving as an additional benefit for the company.
He noted, “It now remains to be seen whether these numbers entice unconvinced investors back into the fold, where the market consensus of the shares as a hold has been in place for some time, although the initial price reaction suggests that there remains more work to do.”
Antonio Simoes, chief executive of L&G, emphasized that the group has “addressed legacy complexities” and is “driving forward” its growth strategy across its core operations, with analysts acknowledging the implementation of its long-term plan.
Simoes stated, “As a sharper, more focused business, we are well-positioned to capitalise on the structural, growing demand for long-term investments and retirement income.”
The surge in the company’s pension risk transfer division is expected to bolster growth, with the UK market valued at £40bn to £50bn annually, leading to Legal & General’s £10.4bn representing approximately 20 percent of market share.
Hugh Fairclough, partner and head of financial services at RSM UK, remarked, “What differentiates L&G is its integrated model. In a more competitive bulk annuity market, pricing alone no longer wins the biggest deals. The decisive factor is increasingly asset origination.” He added that there is an ongoing “asset-sourcing arms race” within the pension risk transfer market, and insurers with robust origination platforms are leading the charge.
“With a 2026 pipeline that includes £17 billion of transactions actively being priced, and multiple £1bn-plus deals already within sight, L&G is well-positioned to lead the next phase of market growth.”
In a market increasingly influenced by demographic shifts and regulatory changes, Legal & General’s recent performance signals the complexities of balancing growth with investor expectations. The share buyback and dividend strategy underline a commitment to shareholders, yet the financial shortfall raises questions about its operational agility. As competition in the insurance sector intensifies, the focus will be on whether the strategies in place can sustain long-term growth while attracting back cautious investors.
