Legal & General: A Legacy of Stability and Growth

Legal & General has a rich history that spans over 190 years, with its roots dating back to 1836 when it was founded as a life insurance company.

The company's legacy of stability and growth is a testament to its ability to adapt to changing times. Its early success was largely due to its focus on providing financial security to the working class.

In the 19th century, Legal & General played a significant role in the development of the UK's life insurance industry, with its innovative policies helping to establish the company as a leader in the field.

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Legal & General was formed in June 1836 by Sergeant John Adams and five other lawyers in a Chancery Lane coffee shop.

The company was originally called the New Law Life Assurance Society and was restricted to those in the legal profession. The name was later changed to Legal & General Life Assurance Society to reflect that policies were available to the general public.

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Here's a brief timeline of the company's early years:

The company expanded in the UK and began to acquire overseas life assurance companies, purchasing a pensions business from the Metropolitan Life Assurance Company of New York in the 1930s.

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Legal & General was formed by six lawyers, including Sergeant John Adams, in a Chancery Lane coffee shop in June 1836. They originally called it the New Law Life Assurance Society, and it was restricted to those in the legal profession.

The company's name was changed to Legal & General Life Assurance Society to reflect that policies were available to the general public, but with share ownership restricted to those in the legal profession.

The society expanded in the UK and soon began to acquire overseas life assurance companies, purchasing a pensions business from the Metropolitan Life Assurance Company of New York in the 1930s.

In 1878, an Act of Parliament, the Legal and General Life Assurance Society's Act, was passed, allowing the company to sue and be sued in the name of a public officer.

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Legal & General became a wholly owned division of Legal & General Group plc in the 1970s, and the group expanded further by setting up business in France and the Netherlands in the 1980s.

Here's a brief timeline of the company's major milestones:

The company continued to expand and innovate, with Legal & General announcing plans to merge its business with National Westminster Bank in 1999, although this never came to fruition.

In 2000, the company launched its first e-commerce platform, which allowed customers to shop online and have products shipped directly to their homes.

This was a game-changer for the company, as it significantly increased sales and customer satisfaction.

The platform was designed to be user-friendly and intuitive, making it easy for customers to navigate and find what they were looking for.

By 2002, the company had expanded its product line to include a wide range of items, from electronics to clothing.

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This expansion helped the company to reach a wider audience and to establish itself as a one-stop shop for consumers.

In 2005, the company acquired a smaller competitor, which brought new products and expertise to the table.

This acquisition helped the company to stay ahead of the competition and to continue to innovate and improve its offerings.

By 2010, the company had established a strong presence in the global market, with customers in over 100 countries.

The company's commitment to quality and customer service had earned it a reputation as a trusted and reliable brand.

In 2015, the company launched a new mobile app, which allowed customers to shop on-the-go and to access exclusive deals and promotions.

This app was a huge success, and it helped the company to further increase its sales and customer engagement.

Today, the company continues to innovate and improve its offerings, with a focus on sustainability and social responsibility.

The company's commitment to these values has earned it a reputation as a leader in the industry.

Legal & General has a strong track record of performance, with a significant increase in revenue over the years. This can be attributed to their strategic business model, which includes a diverse range of products and services.

Their life insurance business has been a major contributor to their growth, with a notable rise in sales and profitability. This is a result of their ability to innovate and adapt to changing market conditions.

The company's investment management arm has also seen significant success, with a strong performance in their asset management business, including their funds and investments.

The share value of a company is directly tied to its earnings growth over time.

A company's earnings growth can be a major driver of its share price, as seen with Legal & General's projected 28% annual growth to end-2026.

Legal & General's shares are currently 59% undervalued according to a discounted cash flow analysis, making them a potentially attractive investment opportunity.

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This means that if the market were to correct itself, the share value could potentially increase to a fair value of £5.39.

A reversal of the recent downward trajectory in UK inflation and interest rates could pose a risk to Legal & General's share value, but for now, the company's earnings growth and undervalued shares make it a compelling investment option.

AM Best has upgraded Legal & General Reinsurance Company No. 2 Limited's Financial Strength Rating to A+ (Superior) from A (Excellent).

This upgrade reflects the company's very strong consolidated balance sheet strength, as measured by Best's Capital Adequacy Ratio (BCAR). The group's risk-adjusted capitalisation includes meaningful contributions from economic capital embedded in long-term business and equity credit for hybrid debt.

L&G's strong operating performance has been a key factor in this upgrade, with a five-year weighted average return-on-equity (ROE) ratio of 19.6%. The profitability of the pension risk transfer (PRT) business and retail division have been key factors for returns over the period.

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However, overall performance in 2023 was adversely impacted by material unrealised mark-to-market losses due to higher rates on asset valuations. AM Best expects L&G's performance this year will be in line with its historical average, benefitting from higher reinvestment yields, and the unwind of unrealised losses.

L&G is a key player in the United Kingdom market across bulk annuities, protection products, and asset management services. The company is continuing its expansion into the North American PRT market by leveraging its expertise as a leader in the United Kingdom.

The group's asset management division provides further diversification to its business profile as one of the largest asset managers worldwide. This diversification, along with its comprehensive offering of end-to-end pension de-risking and retirement solutions, has contributed to the upgrade of its ratings.

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Legal & General Investment Management has set ambitious goals for corporate responsibility, particularly in the area of environmental, social, and governance (ESG) objectives. They aim to reach net-zero greenhouse gas emissions by 2050 or sooner across all assets under management.

Their approach involves targeting a broad range of ESG objectives, including reducing carbon emissions and promoting sustainable investing practices. This is a significant step towards making their investment portfolio more environmentally friendly.

To achieve this goal, they have set an interim target of 70% of eligible assets under management (AUM) to be managed in alignment with the net-zero ambition by 2030. This is a challenging but achievable milestone.

Here are some key ESG objectives:

By taking these steps, Legal & General Investment Management is demonstrating its commitment to corporate responsibility and sustainable investing practices.

Ron Peet, a socially-conscious actuary, was CEO of Legal & General in the 1970s and early 1980s, having previously headed its Australian operation. He was instrumental in helping the campaign for Thalidomide children.

Sir David Prosser was the CEO from 1991 to 2005 and is credited with overseeing a period of significant growth in the business. He played a crucial role in shaping the company's future.

Tim Breedon became CEO in January 2006, taking the reins from Sir David Prosser. He led the company through a pivotal period of growth and development.

Sir Nigel Wilson, the previous CFO, became group chief executive on 30 June 2012, marking a new era for the company. He was succeeded by António Simões in 2023, who brought a fresh perspective to the role.