Legal & General share price: Barclays analysts voice confidence in insurer

By: Tsveta van Son
Tsveta van Son
Tsveta van Son is part of Invezz’s journalist team. She has a BA degree in European Studies and a… read more.
on Feb 18, 2016
Updated: Oct 21, 2019

Legal & General (LON:LGEN) is in the strongest position in Britain’s insurance sector, which has been hit hard by the market downturn, Barclays has stated. Voicing its confidence in the group’s prospects, the bank today reiterated its ‘overweight’ recommendation and target price of 298p on the stock.

In a note to clients, Barclays analyst Alan Devlin remarked that 2016 has seen very extreme market movements, with all asset classes moving in the wrong direction for European insurers. UK insurers have the highest leverage and the stocks have therefore underperformed on concerns of potential credit losses. However, according to Barclays, there is one significant difference between UK insurers and their European rivals – UK insurers reserve for credit losses upfront, and they have already taken the pain of future credit losses. “As we go through the credit cycle, UK insurers will offset losses from their annuity portfolios against their credit default reserves, and earnings/dividends should not be impacted,” Devlin added.

The analyst believes that Legal & General “is actually in the strongest position with a £2.3 billion default reserve on its £43 billion annuity portfolio’ and that any weakness in the share price ‘due to misplaced credit concerns is a buying opportunity”.
The upbeat comment has failed to impress investors, with Legal & General’s shares trading lower today. As of 14:32 GMT, the stock was changing hands at 224.40p, 0.97 percent down intraday. Meanwhile, the FTSE 100 index had eased 0.72 percent to stand at 5,986.75 points.
As of 14:56 GMT, Thursday, 18 February, Legal & General Group Plc share price is 224.85p.

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