Legal and General Reports Decline in Shares Despite Significant Share Buyback

Legal and General has announced a £1.2 billion share buyback as it aims to pursue further acquisitions, particularly in the area of pension risk transfers. This buyback represents the largest in the company’s history, amounting to 8 per cent of its share base, with total returns to shareholders projected to reach £2.4 billion over the next year.

The financial services group highlighted a robust pipeline of pension risk transfer opportunities. This strategy involves the company acquiring the liabilities and assets of traditional defined benefit schemes that have ceased to accept new accruals from their corporate sponsors. Legal and General disclosed that it currently has visibility on ten deals worth over £1 billion that are expected to complete in 2026.

In its recent financial report, the group indicated that core operating profit rose by 6 per cent to £1.62 billion, though this fell short of market expectations. The solvency ratio, a key measure of the firm’s capacity to meet its obligations, declined to 203 per cent from 232 per cent, which resulted in a 6.4 per cent decrease in share price, down 16.5 pence to 241.75 pence.

Profit before tax from continuing operations increased significantly, reaching £824 million, compared to £448 million in the previous period. The investment management division reported assets under management rising to £1.2 trillion, up from £1.14 trillion.

Legal and General’s solvency cover ratio fell to 210 per cent from 232 per cent, which analysts at JP Morgan remarked was below expectations. Chief Executive António Simões stated that the company has made notable progress in restructuring, focusing on simplifying operations while driving growth in its core business segments.

The group’s institutional retirement business saw operating profits increase by 6 per cent to £1.2 billion, while the asset management division reported a modest rise of 0.2 per cent to £402 million. Retail operating profits also grew by 4 per cent to £447 million.

Legal and General aims to pursue pension risk transfer deals worth up to £65 billion over the coming five years in response to increased demand from corporate sponsors wishing to offload their pension schemes. Its main competitors in this market remain Pension Insurance Corporation and Rothesay Life.

Analysts at Peel Hunt have observed that Legal and General is well-positioned to leverage growth opportunities in the UK life insurance market following its strategic realignment. Meanwhile, asset management flows continue to be a concern for the company, despite revenues aligning with expectations.

Simões, who has been at the helm for over two years, has emphasized his commitment to simplifying the business model while enhancing communication with investors regarding growth strategies. The recent announcements reflect Legal and General’s ongoing efforts to adapt to market conditions while ensuring robust performance across its divisions.

As the company progresses, industry observers will be keen to see how it manages its strategic focus and performance amid the evolving financial landscape.