UK shares: Why are brokers turning bearish on L&G?

Goldman Sachs, Citigroup and UBS have moved to Sell recommendations on L&G in the wake of last week's results, describing the recent rally in shares as unsustainable.  Since mid-May shares had rallied around 27% but came under pressure in the wake of the broker updates, which cast doubt on whether this strength can continue.

Shares have rerated aggressively lately and for many the move has run ahead of fundamentals despite the interim results showing a 7% rise in core operating profit and 2% dividend raise. Barclays firmed up its Overweight position and raised its price target to 330p, but other brokers have turned a lot more cautious. UBS says the shares have hit the top of its 210–315p sum-of-the-parts range, while Citi calls the valuation “demanding”.

L&G has to a large extent become a victim of its own rerating - shares have risen strongly on earnings growth, asset disposals, dividend growth and takeover hopes. But the underlying economics may not be as supportive as the recent run-up suggests.

For instance, margins in the crucial pension risk transfer business are being squeezed. UK PRT accounts for about 60% of L&G earnings and UBS notes UK bulk purchase annuity margins dropped to 4.2% in H1 2026 from 7.1% a year before, which reflects stronger competition and pricing pressure.

The other worry is that investors are being compensated too much with dividend growth running ahead of underlying capital generation. 

Citi, which cut its price target to 245p, trimmed its remittance forecasts for 2026 and 2027 by 4.5%, due to lower pension buyout volumes on thinner margins. These remittances ultimately fund the dividend. While dividends look reasonably secure, the stock seems well priced already after running up about 19% higher YTD before yesterday's pullback. Asset-management improvements and £100mn-a-year of asset-optimisation benefits help, but don’t fully compensate and Citi’s 245p target implies substantial share-price downside even after allowing for the dividend.  

UBS, which trimmed its price target on L&G to 280p, also cut M&G shares to sell, noting the runup in UK life insurers' shares in recent months, with MNG something like +25% higher YTD prior to the dip this week. It prefers Aviva and Standard Life, noting that L&G's capital returns aren't especially compelling versus peers.  L&G’s 2028 total capital-return yield is estimate at roughly 7.5%, versus 8%+ for peers once buybacks are included, according to UBS. Despite this Aviva and Standard Life also notched declines yesterday on the others' downgrades.

Goldman, which cut to sell at a PT of 257p, raised its 2026 core EPS forecast around 2%, and its 2026–28 estimates are near consensus – the sell is more about the risk-reward following the ramp in the share price. 

Momentum for these stocks, which was strong, has been checked by these sell calls but European financials have broadly outperformed in the last three months on very strong earnings growth and positive momentum, whilst global investors have looked for diversification out of chip stocks during the July wobble and good yields – the pullback is one to watch ahead of some other results in the UK life insurer sector in the next few weeks. Following L&G's results and these updates Aviva reports interim results this Friday, with M&G on 3 September and Standard Life on 7 September.