Legal & General Group PLC could lack a spark until its new boss arrives in the New Year, according to Jefferies, whcih has downgraded the insurer to 'hold' from 'buy'.
“Whilst Legal & General's long-term prospects remain attractive, we believe there are limited near-term catalysts until the incoming CEO updates the market on his strategy,” it said.
It thinks very large pension risk transfer deals are more likely than a buyback, with the latter being the market's preference in its view.
Losses in the investment portfolio are unlikely, however, the current negative sentiment towards credit risk and commercial real estate is unlikely to improve soon, Jefferies thinks.
It notes L&G's incoming CEO, António Simões, joins from the start of next year which is a key catalyst, and an update on strategic direction is highly anticipated, which should also provide clarity around capital allocation priorities.
Over the long term, L&G's prospects look attractive, the broker said, with a 2024 dividend yield of 10%, though this is slightly below the average total capital return yield amongst UK life insurance peers (12%).
Jefferies has reduced its price target to 230p from 335p reflecting a 13% reduction to its 2024-26 capital generation forecasts and a higher cost of equity to reflect elevated credit risk.
Shares fell 0.7% to 211.50p.