LEGAL & GENERAL (LGEN) SHARES: 2025 PERFORMANCE IN UK, KEY DRIVERS, MILESTONES AND RISKS —'26 OUTLOOK

How did Legal & General shares perform in 2025?

Legal & General Group Plc (LGEN), one of the UK's leading financial services companies, experienced a mixed but resilient performance in its share price and business results during 2025. Despite macroeconomic uncertainty, structural shifts in the pension and insurance markets, and substantial operational changes within the group, LGEN managed to sustain investor confidence, driven by solid fundamentals and a clear long-term vision.

During 2025, LGEN shares traded within a relatively narrow range, showing resilience amidst interest rate volatility and broader equity market uncertainty stemming from regulatory changes and election-year sentiment. The FTSE 100 component began the year at 246p and closed out December trading around 265p, reflecting a modest yet stable gain of roughly 7.7% year-over-year. Market analysts largely viewed this as a steady performance, especially when benchmarked against FTSE 100 peers and the broader financial services sector indices.

The group’s interim results for H1 2025 reported a pre-tax operating profit of £1.2 billion, demonstrating a robust business model across its core divisions — particularly Retirement Institutional and Capital Investment. These units benefited from rising defined benefit pension de-risking transactions and continued demand for long-dated assets. Meanwhile, Legal & General Investment Management (LGIM) showed consistent net inflows driven by global ESG-compliant fund offerings and fixed income popularity amidst yield curve normalisation.

The dividend policy remained a cornerstone of investor attraction. Legal & General declared a full-year dividend of 20.5p per share, up from 19.4p in 2024, marking its 13th consecutive annual increase. Yield-focused investors continued to favour LGEN due to its stable payout and high dividend yield, which hovered near 7.7% over most of the year.

Strategically, the company advanced its digital transformation programme. It unveiled new platforms aimed at enhancing customer engagement across retail financial services, while cost efficiencies were realised through legacy system overhauls. Leadership changes — with António Simões officially taking over the CEO role in early 2025 — also marked a pivotal transition point, with investors closely monitoring changes in capital allocation philosophy and core business priorities.

Externally, regulatory headwinds — including the implementation of Solvency UK (a post-Brexit successor to Solvency II rules) — introduced new capital requirements that Legal & General navigated soundly. The company remained well-capitalised with a Solvency Ratio around 230%, well above UK regulatory thresholds.

From ESG and sustainability perspectives, LGEN made noticeable progress, including substantial clean energy infrastructure investments and reinforcing its commitment to net zero alignment by 2050. This attracted additional institutional capital to LGIM’s offerings and bolstered the firm’s corporate reputation.

In summary, Legal & General shares in 2025 demonstrated durability and income consistency in the face of a more cautious and volatile environment. Its performance underscored the company's defensive characteristics and revenue diversity — key reasons for retaining investor interest heading into 2026.

What sustained Legal & General’s momentum in 2025?

Several factors contributed to Legal & General’s relatively stable share performance in 2025. These drivers spanned across macroeconomic conditions, industry dynamics, corporate execution, and shareholder expectations — each reinforcing the stock's perceived value and offering clues about its direction for 2026.

1. Interest rate environment

Despite early 2025 concerns about persistently high Bank of England base rates, inflation showed signs of easing by mid-year. This allowed the monetary policy committee to gradually pivot toward rate stabilisation. For Legal & General, this macro backdrop provided tailwinds, particularly for its annuity and pension risk transfer business, given the improved pricing environment and bond yield dynamics. This facilitated a stronger demand pipeline from UK corporate pension schemes seeking de-risking solutions.

2. Structural demand for pension de-risking

The defined benefit (DB) pension market continued to accelerate, with companies opting to transfer liabilities through buy-ins and buyouts. According to the Pension Protection Fund, 2025 saw record volumes in pension risk transfer activity in the UK. Legal & General, being a market leader, capitalised on this demand, securing a robust pipeline of multi-billion-pound deals, further solidifying its Retirement Institutional segment as a core profit driver.

3. Investment Management: Resilient global inflows

Legal & General Investment Management successfully sustained net inflows during a turbulent market year, supported by growing interest from global institutional investors. The firm’s ESG-focussed strategies, particularly in fixed income and real assets, were in high demand, reflecting LGIM’s brand strength and portfolio innovation. Assets under management (AUM) surpassed £1.5 trillion by Q4 2025, aided by global diversification and product innovation in passive funds and thematic exposures.

4. Shareholder returns and dividend consistency

High dividend yield continued to be a major appeal of LGEN shares. Even as capital appreciation remained modest, income-focused investors consistently prioritised the stock for its predictable dividend progression. In the context of low-growth equity markets, LGEN’s 7.7% dividend yield stood out positively on comparative metrics, leading to a steady flow of retail and pension fund capital into the stock.

5. Strong capital position and regulatory navigation

LGEN’s proactive management of its capital structure allowed it to engage in continued infrastructure and clean energy investments, aligning with long-term policy trends and ESG mandates. The firm’s capital surplus enabled resilience against Solvency UK implementation, insulating shareholder value whilst maintaining strong liquidity.

6. Strategic shift under new leadership

António Simões made strategic clarity a priority during his first year as CEO. Early signs of focusing more on digital transformation, simplification of the product suite, and rigorous risk discipline sent a signal to the market that a new strategic era was underway, rooted in sustainable long-term value creation. While it’s early to assess definitive financial impact, investor sentiment was largely positive about transparent communication and disciplined execution.

Collectively, these factors shielded LGEN's share price from the more acute volatility seen in financial peers and provided a solid platform for examining opportunities and risks approaching 2026.

What are the risks and opportunities for LGEN in 2026?

As the calendar turns to 2026, investors and market watchers are keenly evaluating the potential trajectory for Legal & General shares. While the company’s robust fundamentals and recurring income profile continue to support long-term appeal, several factors — both external and internal — may influence LGEN’s performance in the new year.

1. Regulatory and policy risk

One of the main headwinds anticipated in 2026 revolves around the full implementation impact of Solvency UK reforms. While Legal & General broadly adapted well to the initial changes, 2026 could expose longer-term implications for capital scalability and pricing flexibility in its retirement business. Additionally, scrutiny from the Financial Conduct Authority (FCA) on legacy pension platforms and transparency standards could unveil operational cost challenges or margin pressures.

2. Market volatility and interest rate uncertainty

Although the current Bank of England stance is stabilising, any sharp re-emergence of inflation could force a monetary policy shift. In such an environment, mark-to-market impacts on asset portfolios or sudden policy reversals could affect long-dated liabilities and solvency buffers. Further, global geopolitical risk — particularly in the US and EU — could spill over into investor sentiment regarding UK asset managers and insurers, including LGEN.

3. Competition in asset management

While LGIM has been a steady performer, the asset management industry remains fiercely competitive, particularly in the passive and sustainable investing arenas. US rivals and fintech-led platforms are increasingly encroaching on client segments across Europe. Maintaining LGIM’s market share, especially among institutional investors, will require consistent product innovation, cost efficiency, and marketing visibility.

4. Digital transformation execution

LGEN’s pivot to expand its digitally enabled financial services footprint presents both a significant opportunity and risk. The successful deployment of its revamped platforms and customer interface systems will be key to its strategy in Individual Retirement and Protection segments. Delays or underwhelming results could affect growth metrics, especially in a competitive consumer finance landscape emphasising speed, UX, and integration.

5. Strategic capital deployment and M&A

Investors are watching closely whether the firm embraces material acquisitions under Simões’ leadership or sticks with organic growth. While recent hints at potential partnerships in AI-enhanced financial advisory services, retirement platforms in emerging markets, or advanced analytics offer excitement, they also represent execution risks that could impact earnings or balance sheet leverage.

6. ESG expectations and climate mandates

Being a leader in UK impact investing also places LGEN under significant scrutiny to deliver on sustainability pledges. The firm’s 2050 net-zero targets may invite pressure to accelerate intermediate milestones. If green capital deployment lags or emissions reporting is deemed insufficient, reputational risks could arise, particularly with institutional capital providers expecting leadership in climate action.

Outlook: cautiously optimistic

Despite these uncertainties, consensus analyst sentiment remains cautiously optimistic. Earnings forecasts suggest moderate growth, underpinned by Retirement sales and AUM momentum. The dividend is expected to grow modestly again in 2026, and the company’s capital strength shields it from near-term shock. Barring severe macroeconomic deterioration, LGEN appears well-positioned to continue offering income yield with capital preservation.

For investors in 2026, key watchpoints include:

• Execution of the digital platform rollout
• Performance of LGIM against global peers in AUM inflows
• Further pension de-risking momentum in UK and North America
• CEO Simões’ capital allocation decisions and shareholder engagement
• The real-world impact of Solvency UK adjustments

Ultimately, Legal & General remains a stalwart of UK financial markets, anchored in a business model built for long-term relevance. However, the path through 2026 demands agile risk management, strategic clarity, and continued innovation.