Authorized & Common (LGEN) shares have surged 8.25% as I write this on Friday (7 February), and I couldn’t be happier. I’ve been ready some time for this second. In actual fact, I used to be digging in for a for much longer wait, so that is an early bonus.

At first, I believed the FTSE 100 insurer and asset supervisor had revealed a bumper set of full-year outcomes, however these don’t land till 12 March. 

As an alternative, we bought a blockbuster announcement: Authorized & Common is promoting its US safety enterprise to Japanese mutual insurer Meiji Yasuda for $2.3bn. In return, Meiji Yasuda will take a 5% stake in L&G.

Authorized & Common CEO António Simões referred to as it a “transformative transaction” that brings each strategic and monetary advantages. 

It’s high of the FTSE 100 chief board!

It’s actually reworked the Authorized & Common share price. It’s been sluggish for years, falling 5% over 12 months and 25% over 5 years. That’s regardless of a well-received replace in December outlining £5bn to £6bn in Solvency II capital era between 2025 and 2027.

Again then, I wrote that “I love my Legal & General shares even more after today’s exciting update”. Now, my devotion is being reciprocated.

FTSE 100 financials have struggled with inventory market volatility, UK financial considerations and excessive rates of interest. The latter made money and bonds extra engaging, however investing is cyclical, and that’s altering. 

With the Financial institution of England reducing charges thrice since August, and with extra probably, money and bond yields will fall. Against this, Authorized & Common’s dividend yield nonetheless stands at a staggering 7.8%.

I’ve reinvested each dividend, constructing my stake extra of the restoration. That pleased day appears to be getting nearer.

Underneath at this time’s deal, Meiji Yasuda will take over Authorized & Common’s US safety enterprise and achieve a 20% stake in its US Pension Threat Switch (PRT) unit. Authorized & Common retains 80% by way of reinsurance preparations.

Authorized & Common plans to make use of £400m to fund US PRT reinsurance and – drum roll – pump a chunky £1bn into a brand new share buyback programme. That dwarfs the current £200m one. The remainder of the proceeds might be reinvested into the enterprise, hopefully driving additional development.

I’m getting revenue in addition to development

Between 2025 and 2027, Authorized & Common expects to return round 40% of its market cap through dividends and buybacks. Given at this time’s £15bn cap, that’s £6bn. This must also ease considerations about dividend sustainability. Excessive yields usually sign bother, however that doesn’t seem like the case right here.

One sticking level is valuation. The inventory seems to be surprisingly costly, buying and selling at 32 instances earnings. In August, Authorized & Common reported a 40% drop in half-year post-tax revenue to £220m. Core working revenue edged up simply £5m to £849m. It’s not firing on all cylinders but. Possibly it by no means will.

Authorized & Common operates in a mature, aggressive market at a difficult time for the worldwide financial system. Donald Trump’s commerce tariffs threats and a possible UK recession dangers add uncertainty. Shopping for at this time dangers profit-takers pouncing.

I nonetheless see the long-term case strengthening. I purchased L&G thrice in 2023. My shares are up simply 12.5% since then (most of that at this time), however my complete return, together with dividends, is nearer to 25%.

No ensures, in fact. But when Authorized & Common delivers on its guarantees, at this time’s rally might be simply the beginning.