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Legal & General reported a rise in core profits last year, but shares have fallen after the figures narrowly missed expectations.
Britain’s biggest money manager reported 6 per cent growth in core operating profit to £1.62billion, marginally missing the expected £1.65billion, which has sent shares around 5 per cent lower to 246p this morning.
Its Solvency II cover ratio – a key metric of financial strength – was also down, from 232 per cent to 210 per cent.
The financial behemoth will launch a £1.2billion share buyback programme as expected, comprising £1billion of proceeds from the sale of its US Protection business and £200million from its recurring annual distribution policy.
It also announced a dividend of 21.79p a share, but that failed to cheer investors with shares down over 5 per cent to 244p this morning.
L&G narrowly missed profit expectations sending shares lower but says overhaul is paying off
However, analysts say that chief executive Antonio Simoes’ turnaround plan, announced in 2024, is starting to take shape. He today said L&G was ‘a sharper, more focused business’ following a year of restructuring.
After veteran boss Sir Nigel Wilson left the firm, L&G said it would simplify the business and ramp up its lucrative pension risk transfer business.
These buyouts – when businesses pay financial firms to take over the running of legacy pension schemes - have become a key division for L&G. It wrote £11.8billion in the division last year, including £10.4billion in the UK, and Simoes expects further growth.
Its asset management revenues rose 4 per cent to £1.04billion and now holds AUM of £1.2trillion, with a shift towards higher margin products.
Core operating profit in its retail division grew 4 per cent to £447million, driven by workplace Defined Contributions Asset Under Administration, which jumped 21 per cent to £114billion.
It expects monthly contributions to grow to £900million by the end of the year in its retail markets, with a strong pipeline in the annuities market too.
‘We are on track to achieve the financial targets set out in our strategy,’ said Simoes. 'Our priority now is to accelerate this momentum, maintaining discipline and delivering enhanced shareholder returns.’
L&G said its core earnings per share grew 9 per cent at the upper end of its guidance.
Richard Hunter, head of markets at Interactive Investor said L&G’s new strategy ‘is now playing out’ with ‘little doubt as to the longer-term potential for the savings and investment market’.
‘In addition, and in line with its announced growth target, a projected dividend yield of 8.4 per cent is at a heady level, paying investors handsomely to wait as the strategy unfolds,’ he added.
‘As such, the stock has become something of an income-seeker’s favourite over recent times, with the yield being the highest to be found within the FTSE 100.’
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