1Sem.·

Legal & General (LGEN.L) vs Aviva (AV.)

$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.

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