Key Takeaways
- Legal & General (LGEN) shares declined approximately 6% following disappointing analyst forecasts
- Annual core operating profit increased 6% to £1.62 billion, falling short of market expectations
- Solvency II ratio decreased to 210% from 232%, below analyst projections
- The firm unveiled a record £1.2 billion share repurchase program
- Combined shareholder distributions planned at £2.4 billion over 12 months
Legal & General reported a 6% increase in full-year core earnings for 2025, yet the market response was decidedly negative. Shares tumbled as the results failed to meet analyst projections and revealed a deteriorating solvency position.
Legal & General Group Plc, LGEN.L
The company’s core operating profit reached £1.62 billion, falling just shy of analyst predictions. Pre-tax profit surged 143% to £807 million — yet this figure disappointed compared to the consensus forecast of approximately £1.19 billion.
Core earnings per share climbed 9% to 20.93p, landing at the upper boundary of L&G’s projected 6–9% guidance band. Management characterized this achievement as encouraging for the firm’s trajectory.
Nevertheless, market participants responded by selling shares. During mid-morning London trading, LGEN had fallen roughly 5.7% to 243.8p — marking its steepest single-day decline in nearly a year.
The company’s Solvency II coverage ratio proved to be another pain point. The metric registered at 210%, declining from the previous year’s 232%. This also underperformed analyst forecasts and represents a critical indicator of the insurer’s financial resilience.
CEO António Simões dismissed these worries. He emphasized that the firm felt “very comfortable” regarding its capital position and highlighted the £1.2 billion buyback program — unprecedented in L&G’s corporate history — as evidence of management’s conviction.
“In two years, we’ve reshaped the company,” Simões explained to Reuters. He characterized L&G as “a sharper, more focused business” after completing a restructuring phase.
Capital Returns and Operational Results
Combined investor distributions are projected at £2.4 billion during the coming 12 months, with an ambitious £5 billion target spanning 2025 through 2027. The company has set dividend per share growth guidance at 2%.
The pension risk transfer segment delivered robust performance. L&G originated £11.8 billion in global bulk annuity transactions, including £10.4 billion within the UK market. Workplace defined-contribution assets under administration expanded 21% to reach £114 billion.
The asset management business also demonstrated progress. Private markets assets jumped 32% to £75 billion, while average fee margins widened to 9.1 basis points.
Andreas Van Embden, an analyst at Peel Hunt, described the release as a “solid set of results, broadly in line with estimates at the operating level,” though he noted a 4% shortfall in net asset value attributed to investment variations.
Abid Hussain from Panmure Liberum observed that 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, is carefully tracking macroeconomic conditions. Simões indicated the firm is assessing the potential market consequences of the escalating U.S.-Israeli war on Iran, which has elevated oil prices and sparked concerns regarding global economic stability.
L&G maintains substantial positions in UK government bonds, where yields have climbed. Simões noted 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 stated.
The insurer also identified pressures within the U.S. private credit sector as a monitoring priority. L&G established a collaboration with Blackstone in U.S. private credit during the previous year, and Simões emphasized that its strategy toward high-quality credit remains unchanged.
Looking ahead to 2026, management projects core operating EPS growth will continue at the upper end of the 6–9% range, anticipating sustained robust bulk annuity transaction volumes.
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