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Legal & General Group
What is Legal & General Group's Growth Strategy?
Legal & General Group, under new CEO António Simões, has outlined a strategic refresh focused on three core divisions: Institutional Retirement, Asset Management, and Retail. This aims for a simpler, better-connected L&G.
This strategic pivot is crucial in navigating industry shifts and evolving customer demands. The company's history, dating back to 1836, showcases a consistent drive for financial security and expansion.
Legal & General manages a substantial £1.1 trillion in assets as of March 2025, positioning it as a major global investor. Understanding its future growth plans, including expansion and innovation, is key. For a deeper dive into its market positioning, explore the Legal & General Group BCG Matrix.
How Is Legal & General Group Expanding Its Reach?
Legal & General's growth strategy is centered on three core divisions: Institutional Retirement, Asset Management, and Retail. The company is actively pursuing international expansion, with a significant focus on the United States market.
Institutional Retirement Expansion
Legal & General aims to significantly increase Pension Risk Transfer (PRT) volumes, targeting £50-65 billion in the UK by the end of 2028. This expansion secures benefits for millions of pension holders and generates capital for the Group. The company is already a leader in the US and Canada, writing over £10 billion in PRT deals globally in 2024.
Unified Asset Management Business
A key initiative is the creation of a single Asset Management business by combining LGIM and LGC. This entity, managing over £1.1 trillion in assets as of September 2024, will focus on both public and private markets to drive fee-based earnings. The goal is to increase asset management operating profits to £500-600 million by 2028.
Retail Proposition Strengthening
In the Retail division, the company is enhancing its lifetime retail offering by utilizing its growing Workplace Defined Contribution (DC) platform for customer acquisition. Legal & General is targeting £40-50 billion in cumulative net flows for Workplace DC between 2024 and 2028.
Strategic Divestments for Focus
To sharpen its focus, Legal & General has divested non-core assets. This includes the sale of its UK homebuilder Cala Group for £1.16 billion in September 2024 and its US insurance entity for $2.3 billion (£1.8 billion) in February 2025. These actions are designed to unlock value and support reinvestment in core businesses.
Key Growth Drivers and Future Outlook
Legal & General's future prospects are closely tied to its ability to execute its L&G company strategy, which emphasizes growth in its core divisions and international markets. The company's focus on increasing private markets assets under management from £52 billion to £85 billion by FY 2028 is a significant part of this strategy.
- Targeting £50-65 billion in UK PRT by 2028.
- Aiming for £500-600 million in asset management operating profits by 2028.
- Growing private markets assets under management to £85 billion by FY 2028.
- Targeting £40-50 billion in cumulative net flows for Workplace DC between 2024 and 2028.
- Strategic divestments to support reinvestment in core, synergistic businesses.
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How Does Legal & General Group Invest in Innovation?
The company is actively integrating technology and innovation to foster continuous growth. This involves a strong emphasis on digital transformation, automation, and the adoption of advanced technologies to enhance efficiency and customer engagement across its operations.
Digital Transformation
The company is committed to digital transformation to streamline operations and improve customer interactions.
AI Integration
Leveraging artificial intelligence is a key focus to boost efficiency and enhance customer experience, particularly within its Protection businesses.
New Platform Development
Developing new platforms and technical capabilities is central to achieving growth objectives.
Private Markets Access
In July 2024, the company launched a fund providing 5.2 million Defined Contribution members access to private market investments.
Sustainability Focus
Innovation is intertwined with responsible investing and addressing societal needs, especially in sustainability initiatives.
Net-Zero Commitments
The company's Climate Action strategy aims to build global equity funds aligned with net-zero targets by 2050.
Driving Sustainable Investments
The company's innovation strategy is deeply connected to its commitment to responsible investing and addressing critical societal needs, particularly through sustainability initiatives. This involves integrating financially material sustainability criteria into its investment philosophy, recognizing climate change and nature loss as both risks and opportunities for investment in solutions for the transition to net zero. The company's Climate Action strategy, implemented in its Mastertrust's default investment options, focuses on building a fund of global equities that align with net-zero targets by 2050. By March 2024, all default investment options had surpassed their 2025 decarbonization pathway plans to reduce carbon emissions. Furthermore, the company has made significant investments in projects supporting environmental goals, such as funding next-generation hydro-electric and solar generation projects with The National Trust to aid their Net Zero by 2030 target. Investments also extend to affordable housing, with a total investment of £125 million with Jigsaw Homes Group aimed at delivering over 4,000 new social and affordable homes by 2028. The company's dedication to ESG factors is evident in its Investment Stewardship Team's activities, which included casting 149,000 votes at 15,580 meetings in 2023 to drive systemic change. This proactive approach to sustainability and ESG factors is a core component of the Competitors Landscape of Legal & General Group and its overall growth strategy.
- Integration of sustainability criteria into investment philosophy.
- Climate Action strategy targeting net-zero by 2050.
- Exceeding decarbonization pathway plans by March 2024.
- Investment in renewable energy projects with The National Trust.
- Commitment to affordable housing development with Jigsaw Homes Group.
- Active engagement on ESG factors through investment stewardship.
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What Is Legal & General Group’s Growth Forecast?
Legal & General's financial outlook is robust, with a clear strategy focused on sustainable growth and improved returns. The company has demonstrated consistent performance and has set ambitious targets for the coming years.
Profitability and Growth Targets
For the first half of 2024, Legal & General reported a core operating profit of £849 million, showing a slight increase from the previous year. The company anticipates mid-single-digit year-on-year growth in core operating profit for the full year 2024. This momentum is expected to continue, with a target of 6-9% compound annual growth rate (CAGR) for core operating EPS between 2024 and 2027.
Capital Strength and Returns
The company maintains a strong capital position, with its Solvency II coverage ratio at 232% in 2024, up from 224% in 2023. Legal & General plans to return over £5 billion to shareholders in the next three years through dividends and buybacks, indicating a commitment to shareholder value.
Asset Management Expansion
The Asset Management division is a key focus for growth, with targets for operating profits between £500-600 million by 2028. Fee earnings are projected to grow at 9-15% annually from 2024 to 2028, supported by a focus on higher revenue margins and expanding Private Markets assets under management, which are expected to surpass £85 billion by 2028.
Strategic Capital Allocation
The sale of its US insurance business for $2.3 billion (£1.8 billion) in February 2025 will provide significant capital. A substantial portion of these proceeds, £1 billion, is earmarked for share repurchases, further enhancing shareholder returns and demonstrating a strategic approach to capital deployment as part of the Growth Strategy of Legal & General Group.
Legal & General's financial projections indicate a strong trajectory for future success, underpinned by strategic investments and a clear capital allocation plan. The company's focus on core operating profit growth, enhanced shareholder returns, and expansion in key business areas like asset management positions it well for continued market presence.
2024 Financial Performance
Legal & General reported £1,616 million in core operating profit for the full year 2024, a 6% increase. Core operating EPS also saw a 6% rise, reflecting solid operational execution.
2024-2027 Growth Targets
The company is targeting a 6-9% CAGR for core operating EPS and an operating return on equity exceeding 20% over the period from 2024 to 2027.
Solvency and Surplus Generation
The Solvency II coverage ratio stood at 232% in 2024, and the Group projects £5-6 billion in cumulative Solvency II operational surplus generation between 2025 and 2027.
Asset Management Outlook
Operating profits in Asset Management are targeted at £500-600 million by 2028, with fee earnings expected to grow 9-15% annually from 2024 to 2028.
Shareholder Returns Strategy
Over £5 billion is planned for return to shareholders in the next three years, including a 5% dividend per share growth for FY24 and £500 million in share buybacks targeted for 2025.
US Business Sale Impact
The sale of the US insurance business for $2.3 billion will bolster capital, with £1 billion allocated for share repurchases, reinforcing the company's financial flexibility.
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What Risks Could Slow Legal & General Group’s Growth?
Legal & General's pursuit of growth is inherently linked to navigating a landscape rife with strategic and operational challenges common within the financial services sector. Intense market competition across its core offerings in wealth, retirement, and insurance necessitates constant adaptation and innovation to maintain its market position.
Market Competition
The financial services industry is highly competitive, demanding continuous innovation in wealth, retirement, and insurance products to retain and attract customers.
Regulatory Landscape
Operating within a strictly regulated environment means that evolving regulations present a persistent risk that must be proactively managed to ensure compliance.
Technological Disruption
Adapting to rapid technological advancements is crucial, with risks including data breaches, system failures, and the challenge of timely, cost-effective integration of new technologies.
Information Security
Cyber threats are a complex and dynamic risk, requiring continuous monitoring and robust security measures to protect sensitive information and maintain customer trust.
Financial Risks
Fluctuations in interest rates, inflation, and currency exchange rates can significantly impact investment values, profitability, and the sterling value of overseas earnings.
Investment Performance
The performance of its diverse investment portfolio, including corporate bonds, is subject to market volatility and the inherent risk of default, impacting overall returns.
The company's insurance operations are particularly susceptible to specific risks that impact its long-term viability and profitability. Longevity, mortality, and morbidity risks are paramount; deviations in actual life expectancy or health trends from the assumptions used in pricing can necessitate increased reserves and reduce profits. The potential for life catastrophe events, which could lead to widespread loss of life or disability, is also a consideration in risk assessments. Furthermore, persistency risk exists, where policies might lapse sooner than anticipated, preventing the recovery of initial acquisition and setup costs. Despite demonstrating resilience, as evidenced by a stable core operating profit in the first half of 2024, effectively managing these multifaceted risks remains a cornerstone of achieving its strategic objectives and ensuring the continued success of its Revenue Streams & Business Model of Legal & General Group.
Insurance-Specific Risks
Longevity, mortality, and morbidity risks are critical for the life insurance business, as deviations from pricing assumptions can impact reserves and profitability.
Catastrophe Events
The possibility of large-scale events causing widespread loss of life or disability is factored into the company's risk management framework.
Persistency Risk
Policies lapsing earlier than projected can lead to unrecovered product acquisition and setup costs, posing a financial challenge.
Operational Resilience
Maintaining stable core operating profit, as seen in the first half of 2024, highlights the company's ability to manage challenges, though ongoing risk mitigation is key.
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