New Legal & General Group PLC (LSE:LGEN) chief executive Antonio Simoes is likely to emphasise the insurer’s retail and asset management arms at a scheduled City presentation in the summer, analysts at UBS predict.
The capital markets day in June is likely to come with a new approach to capital management and consequent implications for shareholder returns, they suggested, specifically around continued growth of the dividend.
“We expect management organically to reduce dependence on L&G's capital-intensive pension risk transfer (PRT) business by emphasising the company's retail (particularly wealth) and asset management (particularly private assets) capabilities.”
UK wealth and private/real asset management are L&G's most likely growth areas adds the Swiss bank with investments being made to retain a greater share of existing clients when they retire or enter the "decumulation phase" of their lives.
On financial strategy, UBS added it expects to get a clear capital management framework with target solvency, leverage and liquidity ratios.
“A target a group solvency ratio range of 160-190% seems appropriate, with a leverage ratio target of c.30% and holding company liquidity range of £1-1.5bn."
Based on these ranges, UBS believe L&G can grow its dividend mid to high-single digits, around 7% per year is its assumption, and maintain a 25% share of the UK bulk annuity market.
UBS’s price target for L&G rises to 258p from 235p driven by lower PRT volumes with EPS estimates also reduced due to lower expected earnings from asset management.
'Neutral' remains the Swiss bank's investment view with the shares flat at 254p.