Legal & General falls 5.1% as solvency ratio misses

Legal & General (LON:LGEN) shares declined more than 2% following the insurer's disclosure of a Solvency II capital ratio of 217%, falling 3 percentage points below market expectations. The ratio, a key regulatory metric for insurance firms, was pressured by a temporary 6-point drag linked to its non-retained U.S. business, which management noted will reverse after a pending transaction concludes. This shortfall overshadowed stronger-than-expected first-half 2025 financial results, including a 9% year-on-year increase in core operating earnings per share, which reached the upper end of guidance and exceeded forecasts by 4.2%. Core operating profit rose 5.3% above estimates, while total operating profit was 2.5% higher than anticipated. Segment performance showed broad strength, with institutional retirement results up 5.5%, retail up 4.4%, and asset management up 0.5% relative to expectations. However, non-core operations underperformed, as the non-retained U.S. business missed targets by 40.5% and the corporate investment unit fell short by 17.2%. Analysts noted that the company benefited from a "relatively undemanding consensus," suggesting potential for revised expectations. Despite robust earnings, the capital ratio miss weighed on investor sentiment, highlighting regulatory and operational risks amid strategic restructuring efforts.