Against a background of record bulk pensions transfer deals, analysts at Barclays see Legal & General Group PLC (LSE:LGEN) as well positioned to continue growing and potentially increase share buybacks.
The FTSE 100 life insurer in the past fortnight announced record sales in the US of US$160 million and the biggest bulk annuity deal in its history.
"The consistent message from UK insurers is that bulk annuity margins should remain resilient given high demand for the product from pension funds, and we calculate that L&G can withstand a meaningful margin decline before its earnings growth is impacted," the analysts said.
Advisory firm LCP has forecast that bulk annuity volumes over the next five years could reach up to £360 billion.
Barclays estimates for L&G's UK bulk annuity volumes are towards the lower end of LCP's potential range, assuming they maintain their current market share of circa 26%, which the analyst team said offered upside risk to its estimates.
They say the investment case is further supported by strong solvency levels to support growth, with "a potential buy-back as upside risk".
Barclays, which reiterated its 'overweight' rating, said L&G's solid financial foundation is evident in its impressive Solvency II ratio, outpacing UK life insurance peers.
This strong capital position enables L&G to navigate rate fluctuations while supporting growth initiatives.
The firm's financial stability also allows for consistent dividend payouts and debt management, with no pressing debt obligations until October 2025.
Barclays nudged up its price target to 336p from 333p.