$LGEN (-0.33%) v $AV. (+1.02%)
💡 Core Investment Thesis
- Legal & General: Deep-value income play with 9.1% dividend yield, leveraging global pensions and private markets. Trading below fair value but facing restructuring execution risks.
- Aviva: Growth-focused insurer with 7.3% yield + 12% profit growth target, capitalising on UK wealth consolidation and efficiency gains. Higher operational momentum but vulnerable to UK policy shifts.
📊 Business Models & Strategy
Legal & General
- Global Footprint: UK, US, Europe, Asia exposure
- Core Segments: Institutional pensions (£1.2tn AUM), private markets expansion
- Restructuring: Early-stage transformation under new CEO
- Key Advantage: Diversification hedges UK volatility
Aviva
- Focused Markets: UK, Ireland, Canada dominance
- Core Segments: General insurance, wealth management (£200bn AUM)
- Strategic Wins: Direct Line acquisition (£500m synergy potential)
- Key Advantage: Streamlined ops post-£1.8bn cost cuts
💰 Financial Performance
Legal & General
- Revenue: £11.97bn (2024, flat YoY)
- Profit: Stagnant; cost-cutting underway
- Valuation: P/E 10.5×, 3.6% below AI fair value
- Dividend: 9.1% yield (21.3p) with 95% payout ratio
Aviva
- Revenue: £12.2bn (2024, +12% YoY)
- Profit: £1.77bn (+20% YoY), targeting £2bn by 2026
- Valuation: P/E 10.4×, slightly "rich" vs macro conditions
- Dividend: 7.3% yield (34.7p) with 75% payout ratio
🌍 Growth Catalysts & Risks
Shared Opportunities
- Ageing populations driving retirement demand
- UK Solvency II reforms (potential capital flexibility)
Legal & General Headwinds
- Low dividend coverage (95% payout)
- Execution risk in global restructuring
Aviva Headwinds
- Interest rate sensitivity (NIM: 1.59%)
- Integration risks from Direct Line acquisition
⚠️ Key Risks
- UK Policy Volatility: Post-election regulatory uncertainty
- Rate Sensitivity: BoE cuts compressing margins
- Company-Specific:
- L&G: Pension risk transfer slowdown
- Aviva: Wealth platform competition
🎯 Investment Recommendations
Choose Legal & General For
- Income Priority: 9.1% yield with global diversification
- Value Focus: Margin of safety at <240p entry
- Risk Tolerance: Accepting restructuring uncertainty
Choose Aviva For
- Growth + Income: 7.3% yield with double-digit profit growth
- Operational Efficiency: Post-restructuring momentum
- Entry Strategy: Below 580p (8%+ forward yield)
Total Return Scenarios (12 Months)
- Base Case:
- L&G: 15% (9% price + 6% dividend)
- Aviva: 18% (10% price + 8% dividend)
- Bull Case:
- L&G: 25% (rate cuts + buyback)
- Aviva: 30% (acquisition synergies)
- Bear Case:
- L&G: -10% (UK recession)
- Aviva: -8% (integration failures)
⚖️ Bottom Line
L&G delivers superior immediate income with global stability, while Aviva offers stronger growth prospects through UK consolidation. Blend both for balanced exposure: L&G for yield resilience, Aviva for capital appreciation.
Tactical Watch: Monitor Aviva’s Direct Line integration (H2 2025) and L&G’s restructuring milestones for entry opportunities.
Can L&G sustain its 9.1% yield with 95% payout?
Will Aviva’s wealth platform offset interest rate risks?
How exposed are your holdings to UK policy shifts?
Disclaimer: Not financial advice. Conduct independent due diligence.
