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Investing.com -- Legal & General (LON:LGEN) on Wednesday announced a new share buyback program worth £500 million, surpassing market expectations of about £450 million.
Analysts at Jefferies noted that only one sell-side estimate had projected a higher figure. The company’s ordinary dividend has been set at 21.36p per share, in line with expectations, and management reaffirmed their commitment to returning £5 billion—about 40% of its market capitalization—to shareholders within the next three years.
Beyond capital returns, the UK-based life insurance and financial services company’s earnings results largely met consensus forecasts, with only marginal deviations across key business segments.
Given that the market had recently heard from Legal & General’s management, any potential discrepancies or misunderstandings in financial performance had already been addressed in previous communications.
For the 2024 fiscal year, core operating profit was reported at £1.62 billion, closely aligning with the expected £1.62 billion.
Institutional Retirement, a key revenue driver, generated an operating profit of £1.11 billion, slightly ahead of the anticipated £1.10 billion.
The Asset Management division reported an operating profit of £401 million, matching expectations.
Meanwhile, the Retail segment underperformed slightly, posting an operating profit of £504 million, which was 3.1% below the projected £520 million.
The company’s cost management efforts yielded some positive results. Group debt costs were reported at £216 million, 5.7% lower than the estimated £229 million.
Investment project expenses also came in lower than expected, at £178 million compared to projections of £188 million.
Total (EPA:TTEF) operating profit stood at £1.71 billion, falling 2.3% short of the £1.75 billion expectation. Earnings per share also slightly underperformed, coming in at 20.23p compared to an estimated 20.57p, a 1.7% decline.
However, operational surplus generation outperformed expectations by 2%, reaching £1.75 billion. The Solvency II coverage ratio of 232% was 1 percentage point higher than forecasted.
Jefferies analysts maintained a "hold" rating on Legal & General, with a price target of 230p per share, which represents a downside of 6% from the prior day’s closing price of 244.90p. The stock’s 52-week range has fluctuated between 266p and 211p, with a market capitalization of £14.5 billion.
Legal & General’s valuation remains rooted in a discounted cash flow and sum-of-the-parts model, emphasizing surplus capital generation under Solvency II regulations.
Analysts at Jefferies identified potential upside risks, including higher bond yields, increased bulk annuity transaction volumes, and greater net inflows in asset management.
Conversely, downside risks include credit defaults, equity market volatility, and declining real estate values.