Legal & General Group (LGEN.L) Downgrade to Sell Sequencing risk skews risk reward to the downside

Equity Research 11 August 2026 | 5:03AM BST

Legal & General Group (LGEN.L) Downgrade to Sell: Sequencing risk skews risk-reward to the downside

LGEN.L 12m Price Target: 257p Price: 311.2p Downside: 17.4% SELL Andrew Baker, CFA L&G has outperformed despite increased competitive intensity: | Goldman Sachs International L&G’s shares are up c.21% YTD, outperforming the SXIP by Vash Gosalia, CFA c.14ppts. We can partially explain some of this outperformance | Goldman Sachs International through the closing of its US protection sale (triggering Meiji Yasuda buying and a buyback), and a press article suggesting that L&G Alice Palumbo | Goldman Sachs International could be a potential M&A target (to which we ascribe a low probability). However, the outperformance has also come against a backdrop of: (1) increased competition in the UK bulk annuity Key Data _____________________________________ Market cap: £16.8bn / $22.7bn market (>50% of L&G’s earnings); and (2) narrow corporate spreads 3m ADTV: £57.1mn / $76.5mn United Kingdom leading to margin pressure. Europe Insurance Shares outst. (mn): 5,389.2 Building optionality at the expense of margins and earnings M&A Rank: 3

visibility: To counter narrow spreads, management has GS Forecast __________________________________ 12/25 12/26E 12/27E 12/28E understandably pivoted to a gilt-heavy new business investment PBT (£ mn) New 807.0 2,700.8 1,643.6 1,848.7

strategy as a way of maintaining IRRs of >14% (on a lower amount of PBT (£ mn) Old 807.0 3,047.0 1,589.2 1,839.7 EPS (p) New deployed capital), building a store of future balance sheet EPS (p) Old

optionality, and reducing new business strain. However, the DPS (p) BVPS (p) gilt-heavy strategy has also resulted in lower new business margins Tang. BVPS (p) P/E (X) and lower earnings visibility. Additionally, the PRA’s proposal to increase the capital requirements for Funded Re have the potential 6/26 12/26E 6/27E 12/27E EPS (p) to either reduce flows or increase capital requirements at a time of GS Factor Profile ______________________________ dividend cover debates (where we are not expecting a dividend cut). Growth

Spread widening is the best fundamental scenario but creates Financial Returns

sequencing risk: We see widening corporate spreads as the Multiple fundamental upside scenario for L&G: they would improve new business margins, allow the redeployment of its back-book Integrated

optionality, and improve dividend cover. However, we believe this Percentile 20th 40th 60th 80th 100th

creates sequencing risk, as history suggests that L&G’s LGEN.L relative to Europe Coverage sector-leading credit leverage would mean its shares would likely LGEN.L relative to Europe Insurance sell-off first in this scenario. Coupled with a dividend yield spread Source: Company data, Goldman Sachs Research estimates. over UK 10-year gilts that is now at its lowest in 10 years, we see the See disclosures for details. risk-reward as skewed to the downside and downgrade the stock to Sell from Neutral (£2.57 price target unchanged).

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Goldman Sachs Legal & General Group (LGEN.L)

Legal & General Group (LGEN.L) Balance Sheet (£ mn) _______________________________________ SELL Rating since Aug 11, 2026 12/25 12/26E 12/27E 12/28E Total assets 582,268.0 625,418.2 650,178.6 675,939.2 Total shareholders’ equity 2,312.0 2,063.6 2,070.8 2,207.8 Minorities Ratios & Valuation __________________________________________ Goodwill /25 12/26E 12/27E 12/28E Tangible book value 1,917.0 1,699.6 1,706.8 1,843.8 Actual ROE (%) ROTE (%) Assets under management 1,197,000.0 1,243,088.5 1,258,918.9 1,297,113.3 Leverage ratio (%) -- -- -- -- Life contractual svcs. mgn.…