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Legal & General AGM: A Vote of Confidence in Turbulent Markets

Cyrus ColeThursday, May 22, 2025 11:35 am ET

2min read

The recent Annual General Meeting (AGM) of Legal & General Group Plc (LGEN) delivered a resounding endorsement of its strategic direction, with all 25 proposed resolutions unanimously passed—a clear signal of shareholder confidence. Yet, this outcome contrasts sharply with lingering financial headwinds highlighted by analysts, creating a compelling opportunity for investors to capitalize on a stock trading at a discounted valuation while management executes on its growth roadmap.

AGM Outcomes: A Mandate for Resilience

The AGM’s key highlight was the overwhelming approval of special resolutions enabling share buybacks and capital flexibility. Resolution 24, authorizing the purchase of own shares, passed with 99.41% support, while Resolution 21, disapplying pre-emption rights, secured 98.96% approval. These votes underscore shareholder faith in Legal & General’s ability to deploy capital strategically to enhance returns. With a forward P/E of 10.0—below its ten-year average of 9.6—the market’s skepticism appears misplaced, especially given the company’s £9.1% dividend yield, one of the highest among European insurers.

The Contradiction: Financial Challenges vs. Strategic Fortitude

Critics point to declining revenues and elevated leverage, with Spark’s Neutral rating citing “operating headwinds” and a “fragile balance sheet.” Yet, the AGM results reveal a nuanced picture:
- Dividend and Buyback Discipline: Legal & General’s commitment to returning £5-6 billion to shareholders between 2025-2027—via a 5% dividend hike in 2024 followed by 2% annual increases—provides a safety net for investors. The recent final dividend approval (15.36 pence/share, with 98.01% support) reinforces this.
- Operational Focus: The consolidation of its Asset Management division (combining LGIM and LGC) and a target to grow private markets to £85 billion by 2028 signal a shift toward higher-margin, fee-based income.
- Governance Strengths: The high approval rates for director re-elections (e.g., Laura Wade-Gery’s 96.21% support) and the Audit Committee’s mandate to set auditor remuneration (98.59% approval) reduce governance risks, a critical factor in volatile markets.

Technical and Sentiment Catalysts

While Spark’s Neutral stance reflects near-term concerns, technical indicators paint a bullish picture:
- Strong Buy Signals: The latest analyst rating is Buy with a price target of £3.20—21% above current levels—driven by expectations of margin stabilization and capital returns.
- Valuation Discount: Trading at a 23% discount to its five-year average P/B ratio, LGEN offers a margin of safety.

Why Act Now?

The AGM outcomes mitigate governance and strategic execution risks, positioning Legal & General as a contrarian play for investors prioritizing valuation and long-term resilience over short-term noise. Key catalysts include:
1. Buyback Execution: The £200 million buyback in 2024 and planned £5-6 billion returns through 2027 could drive EPS growth and valuation re-rating.
2. Dividend Stability: With 44% of assets under management international and a focus on high-margin segments like Pension Risk Transfer (PRT), cash flows remain robust enough to support payouts.
3. Structural Tailwinds: The UK’s aging population and demand for PRT—where Legal & General is a leader—provide a growth runway, while its £1.1 trillion AUM base offers scale advantages.

Conclusion: A Value Play with Upside

Legal & General’s AGM results signal a unified shareholder base backing its strategy to navigate headwinds and capitalize on long-term opportunities. While challenges like leverage and revenue declines persist, the stock’s 9.1% dividend yield, valuation discounts, and governance strength make it a compelling buy for investors willing to look beyond the noise. With execution risks now mitigated by board support, now is the time to position for recovery.

Action: Consider accumulating LGEN shares at current levels, with a target of £3.20 and a stop-loss below the 52-week low. Monitor dividend coverage ratios and buyback progress for confirmation of the turnaround.

This article is for informational purposes only and does not constitute financial advice. Consult a licensed professional before making investment decisions.

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