Legal & General（LGEN LN）：下调至持有评级，大规模回购但股息受到限制

Issuer of report:HSBC Bank plcView HSBC Global Research at:https://www.research.hsbc.comHSBC Global Research Podcasts| Listen to our insightsDOWNGRADE TO HOLDTARGET PRICE(GBPp)255SHARE PRICE(GBPp)242(as of15 May 2025)MARKET DATAMarket cap(GBPm)Market cap (USDm)3m ADTV (USDm)FINANCIALS AND RATIOS(GBPp)Year to12/2024aIFRS EPSIFRS EPS (prev)Change (%)Consensus EPSPE (x)Dividend yield (%)Special yield* (%)Note: * Share buyback52-WEEK PRICE(GBPp)Source:LSEGIBES, HSBC estimatesSteven Haywood*Analyst, EuropeanInsuranceHSBC Bank plcsteven.haywood@hsbcib.com+44 20 7991 3184Kailesh Mistry*, CFAGlobal Head, Insurance & Digital Finance ResearchHSBC Bank plckailesh.mistry@hsbc.com+44 20 7991 6756Faizan Lakhani*Analyst, InsuranceHSBC Bank plcfaizan.lakhani@hsbc.com+44 20 3229 6443* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulationsEquitiesInsuranceUnited Kingdom05/24Target price: 255 14,06618,7092.8610.44-72.612.3384.68.81.411/24 ◆◆◆ PREVIOUS TARGET(GBPp)265UPSIDE/DOWNSIDE+5.5%Free floatBBG69RIC12/2025e12/2026e39.2924.8123.2125.2769.3-1.822.1824.916.29.79.09.23.510.2High: 255 Low: 215 Current: 242 Find out more 2Legal & General: Financials & valuationCapital generation and solvency (GBPm)Year to Dec20242025e2026eOperational surplus generation (Solvency II)1,7511,4351,533New business strain(Solvency II)(409)(270)(358)(357)Net surplus generation (Solvency II)1,3421,1651,175Operating variances (Solvency II)15600HSBC operating FCF1,4981,1651,175-% change39%-22%1%Market movements (Solvency II)(231)00Other (M&A, debt, etc)(192)750(1,400)Shareholder dividends(1,230)(1,223)(1,121)(1,127)Solvency II surplus9,0129,7048,358Solvency II own funds15,86016,433 15,68016,003Solvency II capital requirement6,8486,7297,322Solvency II ratio232%244%214%IFRS P&L summary (GBPm)Year to Dec20242025e2026e2027eL&G Retirement Institutional (LGRI)1,1051,1461,2191,291L&G Retail:504435447-o/w Retail Retirement (LGRR)316317323-o/w L&G Insurance (LGI)188118124L&G Investment Management (LGIM)401426442Group debt costs(216)(218)(220)(223)Investment projects(178)(180)(182)(184)Core operatingprofit1,6161,6091,7051,824Corporate Investment Unit (CIU)954848Total operating profit1,7111,6571,7531,872-% change y/y3%-3%6%Investment variances and other items(1,383)1,3000One-off items and gains onminorities456Profit before tax3322,9621,7591,879Tax charge(137)(650)(386)(412)Minority interest & RT1 interest cost(25)(26)(27)(28)Net income attributable to shareholders1702,2851,3461,439IFRS balance sheetsummary (GBPm)Year to Dec20242025e2026eOrdinary shareholders' equity3,0533,6372,483Goodwill(30)(29)(28)(27)Acquired VIF and other intangibles(450)(450)(450)(450)Tangible net asset value2,5733,1582,005-% change y/y-32%23%-37%CSM, net of tax10,28710,057 10,395 10,711Comprehensive shareholders' equity13,34013,694 12,878 13,328New business value (GBPm, SII basis)Year to Dec20242025e2026e-UK institutional annuities (LGRI)420605715-UK individual annuities (LGRR)132151159UK total annuity business (LGR)552756874UK Protection (LGI)575864US protection (LGA)13500Total new business value744815938PVNBP sales12,68314,788 15,035 15,171New business margin on PVNBP5.9%5.5%6.2%Assets under management (GBPm)Year to Dec20242025e2026e2027eLGIM net flows-48,500-31,233-14,590LGIM AUM1,117,7001,121,3251,142,0571,179,937-% change-4%0%2%LGR AUM96,696106,941 116,890 126,564 Source: HSBCNote:Priced at close of15 May 2025 3L&G’s recent share price performance has beenrelatively underwhelming. It is up 5% year-to-date, which isbroadlyinline with the FTSE 100, but this is after underperforming the indexover2024. It has also performed somewhat worse thanits UKlifepeers since the start of 2025 (andsincethe start of2024). This is despite starting a GBP500m share buyback in March 2025, andannouncing an additionalGBP1bn share buyback to cometowards the end of 2025,due to thesale of its US protection business.Exhibit 1: Share price and indexes performance since start of 202470809010011012013014001-Jan-2401-Apr-2401-Jul-2401-Oct-2401-Jan-2501-Apr-25AvivaL&GM&GPhoenixFTSE 100FTSEurofirst 300 Insurance (in GBP)Source: LSEG Datastream.Note: Aviva (AV/ LN, 586p, rated Buy); M&G (MNG LN, 219p, rated Hold); and Phoenix (PHNX LN, 615p, rated Buy).So,with L&G’s share buybacks it offers some high total capital return yields for shareholders-wesee 12.5% for 2025e and 19.4% for 2026e, correspondingto >30% of L&G’s market cap returnedovertwoyears. However,we forecast L&G’s FCF and net core operating profit not covering thegroup’s yearly normal dividend cost for 2025, and only just covering it in 2026, as illustrated inExhibits 2 and 3. This shows the near-term constraints on L&G’s underlying operations and limitsthe potential growth rate oftheDPS to a low-single-digit levelpafor the medium term.Butit isnot too concerning to us, because of L&G’s relatively high solvency ratio of 232% end-2024,which can support dividends and share buybacks from ex