Legal & General is presented as a deeply undervalued, capital-light compounder with a dominant position in the Pension Risk Transfer (PRT) industry, which contributes over half of its profits. The company pairs this with strong positions in retail retirement products and UK asset management. Despite steady dividend growth (~6.6% CAGR), consistent earnings (~10% adjusted EPS CAGR), and a forecast for 5–8% profit growth, the stock has languished, resulting in a yield near 8.5%. Recent developments—such as new leadership, asset divestitures (e.g., CALA), and a £1.7 billion buyback program—signal a pivot toward simplification and shareholder focus.
Legal & General’s portfolio is well-hedged, with high investment-grade bond exposure and hedges against inflation and longevity risk. Management has guided for £5.9 billion in shareholder returns over the next three years—equivalent to 40% of the current market cap—offering meaningful downside protection. Moreover, the business is trading close to its discounted book of future profits (CSM + RA), implying no value assigned to future growth or asset management earnings. With expected mid-single-digit growth, 10.5% baseline capital return, and potential for re-rating under a new CEO, Veddis estimates a 15–29% IRR over the next five years.
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