London, UK – Legal & General Group recently revealed its revised strategy under new leadership. Antonio Simoes took over as CEO earlier this year and shared the company’s 2023 results a few months later. However, it wasn’t until June that he unveiled his vision for the company going forward.
Simoes, with a background predominantly in banking, needed time to acclimate to the complexities of an insurer like Legal & General Group. Despite this, his presentation of the new strategy received a tepid response, leading to a drop in the company’s stock price.
Investors were particularly disappointed by the company’s decision to reduce dividend growth rates significantly, from 5% to only 2% starting in 2025. This move, contrary to what many had anticipated, left shareholders with diminishing returns in real terms.
Legal & General Group emphasized that while dividend growth would slow, total capital return (comprising dividends and buybacks) would outpace previous rates. The company cited investor feedback as the driving force behind this strategic shift.
The stock’s decline can be attributed to differing expectations among shareholders: income seekers preferring stronger dividend growth and total return investors looking for aggressive growth targets and moderate dividend increases.
Other aspects of the company’s strategy were more positively received, particularly its focus on pension risk transfer (PRT) business and plans to streamline asset management operations by merging Legal & General Capital (LGC) and Legal & General Investment Management (LGIM).
Legal & General Group also aims to capitalize on growth in the retiree population and the shift from defined benefit to defined contribution pension plans, similar to companies like Apollo Global Management. However, some shareholders feel that Legal & General Group lacks the ambitious growth targets necessary to compete effectively in the market.
Overall, Legal & General Group’s strategic moves have elicited mixed reactions from investors, with some concerns about dividend growth rates, while others see potential in the company’s PRT segment and streamlined asset management operations.
Despite the stock’s recent drop, some investors remain optimistic about Legal & General Group’s long-term performance, believing it can provide reliable income and potentially outperform the market, albeit without any significant surprises in store.
