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Legal & General (LGEN) share price prediction: what are its future prospects?

By Prachi Sinha

Edited by Vanessa Kintu

12:40, 14 December 2021

CARDIFF, WALES - OCTOBER 2019: Sign on the boarding around the site of a new building development in Cardiff city centre to mark its ownership and investment by Legal & General.
Legal &General share price prediction: has it secured its future? – Photo: Shutterstock

What started in June 1836 as a mission by six lawyers to build a better society has evolved to be one of Europe’s largest insurance and asset management groups. Legal & General Group (LGEN), is a British multinational financial services and asset management company that aims to safeguard the financial futures of its policyholders.

A constituent of Financial Times Stock Exchange (FTSE) 100, the company is listed on the London Stock Exchange (LSE). The asset management division of L&G, Legal & General Investment Management (LGIM) handles approximately $1.8trn worth of assets, as of 30 June 2021, making it one of the biggest investment management firms in the world in terms of assets under management (AUM).

With inclusive capitalism being at the helm of its vision, LGIM strives to create an economic as well as social impact for its stakeholders. The product and service offerings of the brand span investment management, lifetime mortgages, pensions, annuities and life assurance.

 Business Structure and different divisions of L&G

At the time of writing this article (13 December 2021), the stock was trading at 291.60p. As compared to the lows of 138.60p to which the stock had dropped in March 2020, during the peak of Covid-19, it has traveled a long way up to recovery. Compared to the start of this year, at the close price of 260.70p, the current stock price is trading 32.10 points or 12.31% higher.

5-year stock price chart of L&G

With a strong H1 report for 2021, as published on 4 August 2021, the operating profits rose to £1.08m. This is a 14.05% increase since its H1 2020 reported operating profits of £946m. Will this growth trajectory continue as this year wraps up? In this article, we catch up on the latest news and get analyst insights on Legal & General share price prediction.

L&G stock fundamental analysis

In the wake of recent events, Jeff Davies, L&G’s chief financial officer described 2020 as a pause year. In the company’s 2020 annual report, he mentioned how the decade-old track record of the company’s double-digit growth came to a halt in 2020 because of the Covid-19.

However, the company had an impressive start to 2021, with top-line revenues standing at £14.89m for H1, ending 30 June 2021, giving a positive headway to the Legal & General stock analysis.

Pulling through an impressive performance, the Legal & General Capital division reported a 103.25% (from £123m to £250m) increase in its operating profit, as compared to the H1 2020 results. 

The cumulative profit after tax (PAT) for H1 2021 was reported to be £1.06m, which was 17% shy from the 2020 end-of-year figure of £1.28m. As compared to the H1 2020 reported PAT of £254m, this one-year growth of 318.11% has been phenomenal.

In the insurance avenues, Solvency II coverage ratios are used to measure the company’s capital strength. Based on the risk profiling of the insurance company, it provides a means to compare different insurance companies and promotes transparency. As of H1 2021 financial results, L&G boasts a Solvency II coverage ratio of 183%. It is an improvement of 1,000 basis points over the H1 2020 ratio of 173%.

Legal & General Investment Management or LGIM reported £1.33trn of total assets under management in H1 2021. This was 6.94% higher than its H2 2021 Total AUM, of £1.2trn.

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A strong indicator of profitability, earnings per share reached 17.78p in H1 2021, which was significantly ahead of the H1 2020 figure of 4.89p. As compared to the pre-pandemic times, in H1 2019, this figure stood at 14.74p.

Over the years, L&G has had an established track record of maintaining progressive dividend policies for the benefit of its shareholders. The long-term commitment of the company toward its dividend pay-out was especially noted in 2020 when most companies deferred these pay-outs due to the business implications of the Covid-19. At the end of 2020, L&G matched its 2019 figures of interim and final dividend of 17.57p.

Subsequent to publishing its H1 2021 results on 30 June 2021, the company announced an increase of 5% to its interim dividend pay-out further emphasising its investor-first strategy. From the 4.93p per share interim dividend for the full year 2020, the company increased its 2021 interim dividend to 5.18p.

L&G share price news

Covid-19’s business impact was felt across all industrial segments and financial companies continue to suffer two years forth into the pandemic. The latest in Legal & General share price news is that on 25 November 2021, with the news of the latest Covid-19 variant Omicron surfacing, L&G stock fell by 15.20 points or 5.10%, a day later. Almost three weeks since, the stock continues to stay below the close price of 297.90p as reported on 25 November 2021.

Additionally, Legal & General faces tough competition from other UK insurance giants such as Aviva and M&G. In an attempt to separate itself from the competitors, L&G through its investment arm LGIM, launched Europe’s first local currency Indian government bond exchange traded fund (ETF) as of 28 October 2021. In a conscious effort to allow the UK and European investors to take trading positions in one of the world’s largest government bond markets, the ETF would be listed on the LSE, Deutsche Börse and Borsa Italiana. India, being a developing economy, may offer a higher yield and attractive risk-return trade-off on its fixed income securities as compared to the treasuries of the developed economies. The L&G India INR Government Bond UCITS ETF will look to track the performance of the JP Morgan India Government Fully Accessible Route (FAR) Bonds Index.

On 3 August 2021, L&G announced its 15-year joint venture partnership with NatWest Pension Trustee Limited (NWPTL). This partnership is initiated by investing £500m to develop specialist retirement living communities. These retirement living communities are going to be influenced by the Inspired Villages which were developed in August 2017 by L&G Capital and the Inspired management team. Both NWPTL and L&G aim to provide a positive social and economic impact through this initiative and tackle the problem of housing shortage for the elderly in the UK. A day into the announcement of this partnership, the stock price of L&G shot up by 3% (from 263.80p to 271.50p).

L&G future price forecasts

According to the algorithmic forecasting of Wallet Investor as of 10 December 2021, the Legal & General share target price could increase to the range of 317.36p to 317.90p in December 2026, five years from now. Additionally, in its Legal & General stock forecast, it was mentioned that the price could also potentially drop to 284.50p by June 2022.

Based on the data compiled by Market Beats as of 13 December 2021, out of four analysts, two rated the L&G stock as ‘buy’ and two recommended ‘hold’. Their consensus 12-month LGEN share price forecast target is 329p per share, the stock price projection varying from the low of 269p to the high of 397p. The current analyst price target consensus has an upside of 12.36%.

Sharing a technical perspective, Milan Vaishnav, CMT, MSTA, a consulting technical analyst at Gemstone Equity Research & Advisory Services, says:

“LGEN is presently in a structural uptrend. On the shorter-term daily charts, the stock formed classical double bottom support near 244-248 area; it bounced off from there following a formation of a bullish hammer. The stock has stayed in an upward rising channel since then. With daily MACD reporting a bullish crossover, the present move is likely to continue. Moving on to the weekly charts, following the lows formed in March 2020, the stock is in a structural uptrend. The price action has shown a classical double top resistance being taken out as the stock moved past the 270 to 275 range. Presently, it is seen staging a breakout. So long as the stock remains above 260, it may continue to move higher. The volumes have been higher than their 25-day moving average on all the up-days which is a bullish sign. The weekly MACD is bullish and trades above the signal line. Relative strength index is neutral and shows no divergence against the price.”

Further boosting the investor sentiment, Brad Thomas, CEO of Wide Moat Research called L&G one of the best 6.5% yielding blue-chips, on 5 December 2021. He called it a potentially good buy for anyone comfortable with its risk profile and is not far from becoming a potentially strong buy. He feels it is a company that retirees can trust and bank upon.

When looking for L&G stock forecasts, it’s important to bear in mind that analysts’ forecasts and price targets can be wrong. Analysts’ Snap stock predictions are based on making fundamental and technical studies of the stock’s performance. Past performance is no guarantee of future results.

FAQs

Is L&G stock a good buy?

According to Market Beat, two analysts have given this stock a buy recommendation. As of June 2021, it has reported strong half-yearly financial results and the senior management of the company expects to report double-digit growth in its operating profit for the year ending 31 December 2021.

Note that analyst predictions are often wrong. Forecasts shouldn't be used as a substitute for your own research. Always conduct your own due diligence before investing, and never invest or trade money you cannot afford to lose.

Will the L&G stock go up?

According to an algorithmic-based application, Wallet Investor, the share price for L&G could go as high as 317.90p as of December 2026.

Read more: Boeing (BA) stock forecast: A brighter future in a virus-free world?

Markets in this article

LGEN
Legal & General
2.278 USD
-0.005 -0.220%

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