Legal & General (LGEN) share price has plunged: what next?

Legal & General (LON: LGEN) share price was the worst-performer in the FTSE 100 index on Wednesday after the new Chief Executive unveiled his vision for the company. It dipped by over 3% and reached a low of 235p, its lowest swing since May 3rd. It has dropped by over 8.50% from its highest point this year. 

Legal & General’s new strategy

LGEN is one of the biggest players in the asset management and insurance services in the UK. Its services are in the investments, pensions & retirement, and insurance solutions. It serves millions of customers and holds over £1.15 trillion in assets under management (AUM).

Legal & General’s new CEO announced major changes as he shared his strategy for the company. As part of this strategy, the company’s Institutional retirement business will grow to between £50 and £60 billion by 2028. This is an important industry where companies hire insurers to manage their retirement accounts. 

The company also aims to boost its asset management and retail businesses in the next few years. Also, he hopes to simplify the company by creating a single asset management division and selling non-core businesses like CALA, its housebuilder company. He also plans to return £200 million to shareholders through a buyback this year.  He said:

“By seizing the opportunity in Institutional Retirement while investing to scale and deepen our capabilities in Asset Management and Retail, we will evolve our business to better address society’s changing investment needs.”

The new strategy came at a time when Legal & General’s business is showing signs of slowing down, which explains why it has lagged behind Aviva, which I believe is one of the best stocks in the FTSE 100 index.

LGEN’s operating profit rose slightly in 2023 to over £1.667 billion while its profit after tax dived to £457 million from £783 million a year earlier.  This happened even as the company recorded strong volumes across institutional and individual annuities. 

Legal & General is still a great franchise with a big market share in the insurance business. It also one of the most generous companies in London with an attractive dividend yield of over 7%. Its payout is safe, thanks to the company’s strong balance sheet and the ongoing turnaround.

Legal & General share price analysis

LGEN chart by TradingView

LGEN’s stock peaked at 257p in June as investors waited for the strategy update. It has now pulled back and crashed below the key support levels at 244.4p (August 2022 high) and 243p (January 2023 high).

Legal & General has also crashed below the 50-day and 100-day Exponential Moving Averages (EMA) and retested the crucial support at 233.6p (March 7th high). Therefore, I suspect that the stock will bounce back as investors reflect on the company’s new strategy. If this happens, it will likely retest the key resistance at 243.50p.