ii view: L&G plans return of billions more to shareholders
Sharpening its business focus under the relatively new CEO and offering exposure to ageing demographics and pension provision. Buy, sell, or hold?
2nd April 2025 11:43
by Keith Bowman from interactive investor
Full-year results to 31 December
- Core operating profit up 6% to £1.62 billion
- Pre-tax profit of £337 million, up from £76 million in 2023
- Capital cushion or solvency II coverage ratio of 232%, up from 224%
- Final dividend of 15.36p per share
- Total 2024 dividend up 5% to 21.36p per share
- New £500 million share buyback for 2025, up from £200 million in 2024
Guidance:
- Continues to expect to increase the annual dividend per share by at 2% per annum to 2027
- Targeting shareholder returns via dividends and share buybacks of over £5 billion during the next three years
Chief executive António Simões said:
"2024 has been a year of significant strategic progress and strong financial performance. We delivered 6% growth in our core operating profit and core EPS, alongside excellent new business volumes, while investing for the future.
“Looking ahead, our momentum demonstrates why we are confident in our ability to deliver on our ambitious targets, directing our capital and expertise where they can create lasting value, and making a meaningful impact for customers, shareholders and communities."
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ii round-up:
Legal & General Group (LSE:LGEN) is a major UK financial services company selling life insurance, pensions, annuities and other investments.
It operates across three core divisions. Institutional Retirement provides products such as pension risk transfer to companies looking to outsource their responsibility for paying retired former staff pension members. The division is L&G’s biggest generator of operating profit at around 55% in 2024.
The Retail division offers savings, protection, and retirement products to around 13 million retail policyholders and workplace members. It accounted for around 25% of 2024 operating profit.
Finally, the Asset Management division manages assets of around £1.1 trillion. It generated for the balance of 20% of operating profit during 2024.
For a round-up of these latest results announced on 12 March, please click here.
ii view:
Founded in 1836, L&G today employs over 10,500 people, generating sales largely in the UK with around 17% coming from the US and under 2% elsewhere. Competitors include Aviva (LSE:AV.) and owner of the Standard Life brand Phoenix Group Holdings (LSE:PHNX). Under relatively new chief executive António Simões, Legal & General strategic focuses now include generating sustainable growth, sharpening its focus on existing businesses and enhancing shareholder returns.
For investors, competition for its Asset Management business remains intense, with divisional profit falling over this latest financial year. Changes in life expectancy assumptions and accounting rules can impact profit performance. Higher interest rates may now be tempting some savers back towards bank deposits as opposed to stock market related savings products. Costs for businesses such as wages are now elevated, while the sale of life insurance products brings exposure to unpredictable events such as diseases and pandemics.
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More favourably, a drive to sharpen focus and business sales such as that of its Cala homebuilding business, are now aiding shareholders. Exposure to ageing demographics and pension provision remain core. The use of technology and AI is a big focus at its retail division to help engage customers more effectively and efficiently, while L&G’s financial strength, or Solvency II ratio remains robust at 232%.
On balance, and despite ongoing risks, an enhanced focus on shareholder returns and a forecast dividend yield of close to 9% should keep income investors happy.
Positives:
- Diversity of both product and geographical location
- Attractive dividend payment (not guaranteed)
Negatives:
- High competition for Asset Management services
- Subject to changes in insurance regulation
The average rating of stock market analysts:
Buy
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