London, May 4, 2026, 20:01 BST
Jefferies cut Legal & General Group Plc to Underperform on Monday, lowering its price target to 185 pence from 230 pence and challenging the FTSE 100 insurer’s income case before UK trading resumes. Analyst Derald Goh wrote that the company’s income story was “deteriorating” and that solvency surplus generation was being “fully consumed” by dividends; solvency surplus is the capital buffer generated above regulatory needs. TipRanks
The call matters because L&G is widely held as an income stock. Hargreaves Lansdown showed the shares last closed at 254.90p, with a dividend yield of 8.55% and market value of about £14.21 billion, putting the new Jefferies target roughly 27% below the last close.
There was no immediate regular-session test. The London Stock Exchange was closed Monday for the Early May bank holiday, meaning the first full market reaction to the downgrade will come on Tuesday.
The downgrade lands days after L&G said it had FCA approval to provide Targeted Support, with its first use case aimed at workplace pension members whose defined-contribution, or DC, savings are fully in cash. In a DC pension, the eventual pot depends on contributions and investment returns, not a guaranteed salary-linked payout.
L&G said testing found 85% of recipients wanted to read the targeted-support material, 95% found it easy to understand and 93% were clear on what to do next. Laura Mason, L&G’s retail chief executive, called the approval an “important milestone,” while Paula Llewellyn, head of DC and workplace savings, said support that arrives at the “right moment” can make it easier to act. Legal General Group
The FCA says targeted support lets firms make suggestions designed for groups of consumers with common characteristics, rather than giving full personal advice. The regulator estimates about 23 million consumers are underserved by advice and guidance markets, and said the regime went live on April 6 after firms were allowed to apply from March 2.
Competition is already forming. The Guardian reported on Saturday that Quilter and Royal London were among early firms to gain permission for the service, while Barclays said it intended to launch and supported the new framework.
Jefferies’ scepticism cuts across that growth pitch. Goh argued L&G’s regulatory surplus generation was barely enough to fund the dividend, leaving limited room for extra capital returns or balance-sheet moves, especially as solvency ratios drift lower and leverage remains a concern.
L&G management has pushed back on capital worries before. After March results, Reuters reported Chief Executive António Simões said the group was “very comfortable” with its solvency ratio, even as annual core operating profit of £1.62 billion slightly missed expectations and its Solvency II cover ratio, a key measure of financial strength, fell to 210% from 232%. Reuters
The company has also continued shrinking its share count. A May 1 regulatory filing showed L&G had 5,634,995,043 voting shares at April 30 and had bought 14,532,991 shares on April 29-30 for cancellation, reducing the post-settlement voting share count to 5,620,462,052.
But the risk is plain. If surplus generation weakens or markets hit the capital buffer, L&G may have to choose harder between dividend growth, buybacks and balance-sheet flexibility; if targeted support works, the retail pensions arm gets a better growth story, but if it misfires it could become another regulated cost line rather than a fresh engine of flows.
