It is not often that a life insurer makes the case for excitement, but Legal & General Group PLC's (LSE:LGEN) retail arm is giving it a fair go.
The company is holding a deep dive on the division today, with management keen to highlight what it sees as a rich seam of growth across workplace pensions and retail annuities.
L&G already commands a strong presence in both markets, not to mention the UK protection business, but wants to go further. It hopes to double margins in its workplace pension operation over the medium term, helped by economies of scale.
The ambition is to capture between £40 billion and £50 billion of net new flows from workplace pension assets between 2024 and 2028.
Retail operating profit is targeted to grow by 4-6% a year over the same period, which is modest against the wider group’s 6-9% target range.
A small group-level trading update confirmed that bulk annuity volumes remain healthy, tracking at £11 billion so far this year. Workplace pensions continue to win schemes, and management expects full-year earnings growth to land at the upper end of its target range.
That would match what was suggested at the half-year stage. Cash generation is growing, though at a slower pace than profits.
Operational surplus, the company’s preferred cash proxy, is up about 3%. Net cash generation, the more meaningful measure for dividends, appears to be running in line with the 2% annual dividend growth target.
Peel Hunt sees steady progress. It thinks L&G will deliver earnings per share growth at the top end of its range this year, in line with its own 8% forecast.
The broker notes firmer revenue trends in asset management and ongoing inflows into the retail arm, supported by those workplace pension wins. It also points out that after selling its US life business, L&G trimmed its retail profit growth goal to 4-6% a year, still ahead of Peel's expectations.
The logic is that rising annuity and life protection assets should also lift fee income across the group’s investment arm.
One year into a refocusing effort, L&G seems to be finding its rhythm. Both Peel and Panmure agree the business looks underpinned by solid cash flow and a dividend yield of roughly 9%, which is no small comfort in a nervous market.
At around 10 times 2026 earnings and one times book value, the shares are not exactly shouting for attention, but for patient investors, they might not need to.