Legal & General Shares Plunge 6% Amid Market Concerns

Legal & General’s shares saw a significant 6% decline on Wednesday, March 11, closing at 244.2p each. The plunge followed the release of disappointing full-year results, which fell short of market expectations. Investors had anticipated stronger performance, leading to heightened sensitivity to negative news. The ongoing Middle East conflict has also contributed to a cautious sentiment among investors.

Financial Performance Overview

For the fiscal year 2025, Legal & General reported core operating profit of £1.6 billion. This marked a 6% increase from the previous year but was below the expected £1.7 billion. In a more positive light, core operating earnings per share rose 9% to 20.93p, reaching the upper limit of their projected growth range.

Division Performance

While some areas of the business performed well, the asset management division was less impressive. It recorded only modest growth in assets under management, resulting in a stable operating profit of £402 million year on year. This lack of strong performance disappointed investors, overshadowing the better results from other divisions.

Solvency II Ratio and Share Buyback Plans

Legal & General’s Solvency II ratio decreased to 210% from 230% in 2024, largely due to the forthcoming sale of U.S. insurance assets. This result missed forecasts by approximately 10%. In response, the company has adjusted its medium-term capital targets, now aiming for a Solvency II ratio between 160% and 190%.

• Share Buyback: Legal & General plans to repurchase £1.2 billion worth of shares in 2026.
• Dividend Increase: Aiming for a 2% rise in the annual dividend, consistent with prior plans.

Investment Outlook

With a forward dividend yield reaching 9% and a price-to-earnings (P/E) ratio of 10.2, below the FTSE 100 average, Legal & General may present an attractive opportunity for investors. Despite the current economic challenges, the company has historically provided an average annual return of nearly 10% over the past decade.

Legal & General is refocusing its operations to leverage demographic trends and enhance capital efficiency. While investors might face some short-term turbulence, the long-term growth potential remains promising. Patience will be required as the company implements its revised strategy.

In summary, for those considering dividend investing, Legal & General’s recent developments warrant a closer examination despite the recent share price drop attributed to market concerns.