Legal & General‘s (LSE:LGEN) share price has dived in mid-week trading. At 244.2p per share, the FTSE 100 stock was down 6% on Wednesday (11 March). It’s hurtled lower after releasing full-year results that missed expectations.
It’s perhaps no shock to see the business slump in this scenario. Its shares looked slightly expensive compared to historical norms, leaving it a prime candidate to drop on any sort of bad surprise. It’s not been helped by investors already on edge as the Middle East conflict continues, giving them an added excuse to sell up.
But has the market overreacted to today’s news? And can Legal & General’s shares bounce back sooner rather than later?
Profits miss
Those results for 2025 were far from terrible, even if they fell short of expectations. Core operating profit rose 6% year on year to £1.6bn, which came just shy of a predicted £1.7bn.
In better news, core operating earnings per share rose 9% to 20.93p per share. This was at the top end of guidance (growth of 6%-9% had been tipped).
Legal & General is a sprawling business with fingers in a number of pies. Some parts overperformed, but investors today preferred to focus on those that failed to deliver as hoped. They were especially unimpressed with the firm’s asset management unit, where only “modest growth” in assets under management (AUMs) meant divisional operating profit basically flatlined year on year at £402m.
Historic share buyback
The other chief takeaway from today’s release was the firm’s lower-than-expected Solvency II ratio. Its capital metric dropped to 210% from 230% in 2024, factoring in the upcoming sale of US insurance assets. This missed forecasts by around 10%.
Legal & General announced today it was lowering its capital target over the medium term, which could free up more capital for share buybacks and dividends. Its now targeting a Solvency II ratio of 160%-190%.
Accordingly, the business announced plans to repurchase £1.2bn of shares in 2026, slightly above market expectations and the largest buyback plan in its history. It’s also targeting another 2% increase in the annual dividend, in line with current plans and matching that delivered last year.
What should investors do now?
After today’s drop, Legal & General’s shares carry an enormous 9% forward dividend yield. Its price-to-earnings (P/E) ratio has also dropped to a healthy 10.2 times, below the FTSE 100 average.
Does this make it a top dividend share to consider? I think so, though the tough economic and competitive landscape could lead to some further turbulence. Over the long term, I expect it to keep delivering strong results as demographic changes supercharge market growth.
Legal & General’s delivered an average annual return of almost 10% over the last decade through a mix of share price gains and dividends.
The FTSE firm is restructuring its operations to better capitalise on this opportunity too. This includes focusing on core growth businesses moving towards higher-margin services. Investors may need to be patient as Legal & General executes (and likely refines) its medium-term strategy. But for long-term share pickers, I think it’s worth a serious look right now.
