Legal & General Faces Pressure from Pension Risk Transfer Pricing

Dow Jones
Aug 13

0844 GMT - Legal & General Group has a weaker free cash-flow yield, capital return and dividend cover than peers, and faces pricing pressure in pension risk transfers, J.P.Morgan analysts write. Pension risk transfers involve shifting the financial risks associated with pension liabilities between companies. JPM lowers its recommendation for the U.K. financial-services group's stock to underweight from neutral, and cuts the price target to 270 pence from 285 pence. U.K. pension risk transfer pricing has decoupled from credit spreads due to competition. "As the largest [pension risk transfer] player, L&G is most exposed to optically weak reported margins," JPM says. The company's capital return isn't covered by its own capital generation and is expected to result in a weaker solvency ratio than peers, the analysts add. Shares are down 0.5% at 301.00 pence, but have climbed 15% in the year to date.

 

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