Legal & General plans record buyback but solvency ratio disappoints
Legal & General Group PLC on Wednesday said it was on course to hit financial targets, but shares fell as core operating profit and its solvency 11 ratio fell short of forecasts.
The London-based insurer and asset manager said core operating profit rose 5.9% to £1.62 billion in 2025 from £1.53 billion in 2024, below £1.65 billion Visible Alpha consensus.
Within this, core operating profit rose 6.4% in Institutional Retirement, increased 4.0% in Retail and was flat in Asset Management.
Attributable pretax profit ballooned to £807 million from £332 million.
Core operating earnings per share increased 9.0% to 20.93 pence from 19.20p, a slight miss to 21.17p VA consensus.
Operating return on equity improved to 54.4% from 34.8%.
The pro forma solvency 11 coverage ratio declined to 210% compared to 232% a year ago, and below 221% consensus.
Analysts at RBC Capital Markets called this a ‘significant’ miss reflecting higher capital strain, ’other variances’, and M&A-related impacts.
New business strain rose to £266 million from £257 million a year ago.
In response, shares in L&G fell 5.5% to 244.40p each in London on Wednesday. The wider FTSE 100 was down 1.0%.
‘We have addressed legacy complexities, strengthened our foundations and we are driving forward our growth
strategy across our core businesses,’ Chief Executive Antonio Simoes said.
‘Our priority now is to accelerate this momentum, maintaining discipline and delivering enhanced shareholder returns,’ he added.
L&G said rising discount rates have put downward pressure on valuations, and specific sectors, such as Specialist Commercial Real Estate and Venture Capital, have seen more pronounced challenges. As a result, the insurer wrote down asset values of £304 million.
More positively, L&G said it will begin a £1.2 billion share buyback programme this week, the largest in its history, as part of plans to return around £2.4 billion to shareholders over the next year.
The company proposed a final dividend of 15.67 pence per share, taking the total dividend for 2025 to 21.79p, up 2.0% from 21.36p in 2024.
For 2026, the firm expects growth in core operating EPS to be at the top end of the 6% to 9% three-year target range.
L&G said it has made good progress against 2028 business targets in Institutional Retirement, Asset Management and Retail as well as 2027 group targets.
‘We are delivering sustainable growth across our well-positioned, capital-generative businesses in Institutional Retirement, Asset Management and Retail,’ the firm added.
In addition, L&G set out a new medium-term solvency 11 coverage ratio operating range of 160% to 190%.
‘At the lower end of this range our dividend is sustainable, and this is not an automatic trigger for capital measures,’ L&G added.
‘We are highly confident in the outlook for the business and our ability to deliver our group and business targets,’ the firm said.
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