Goldman Sachs Downgrades Legal & General (LGEN.L) to Sell: Sequencing Risk Skews Risk/Reward to the Downside
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Key Views
- Management's gilts-led new business investment strategy preserves a >14% IRR but lowers new business margins and earnings visibility.
- Corporate bond spread widening is Goldman's best fundamental scenario, yet L&G's industry-leading credit leverage means its shares would sell off first — a sequencing risk.
- The US protection business sale (completed February 2026) generated ~£1.2bn of Solvency II capital, funding ~£1bn of additional buybacks.
- The 2027E dividend yield of 7.2% is high for the sector, but its spread to 10-year gilts is the lowest in a decade.
- The 2027 P/ATBV multiple moves to 1.2x (from 1.1x), leaving L&G ~0.3x below the sector regression line; M&A likelihood is ranked low (3).
Outlook
Watch the November 16 Q3 trading update for evidence on BPA competition. Dividends are near covered in 2027 but uncovered in 2028–29 under the assumed return to traditional new business strain from H2 2027.