Legal & General Share Price: Historical Analysis

Legal & General Group Plc (L&G) is one of the premier multinational financial services groups operating from London. Incorporated in 1836, the company has endured and thrived for over 185 years due to its innovative products and solutions aligning with customer needs.

This article aims to shed light on L&G's history, undertakings, organisational structure, and financial performance, thereby providing a thorough insight into this cornerstone of British and global finance.

History and origins

Legal & General was established in a city coffee shop in 1836 by six lawyers, hence the name 'Legal & General'. It was formed as a life assurance company, aiming to provide families with financial protection upon the death of income earners. Over time, the business expanded its offerings to include pensions, investment products, and general insurance solutions.

The company continued to flourish, becoming a public limited company in 1979. In 1986, L&G extended its reach beyond the UK by opening its investment management business in the USA. This move marked the beginning of a long journey to becoming a multinational entity.

Business operations

L&G operates through three principal divisions: L&G Retail, L&G Capital, and L&G Retirement. These divisions form the core of its business structure, focusing on life insurance, asset management, retirement solutions, and direct investments, respectively.

L&G Retail serves millions of customers, offering insurance, savings, and investment management products. This consumer-facing segment has remained focused on innovation and customer satisfaction, continually refining and expanding its product offerings.

L&G Capital is the direct investment division that focuses on housing, infrastructure, SME finance, and clean energy sectors. Through this division, L&G invests capital back into the real economy, offsetting cyclicality and taking a longer-term investment perspective.

L&G Retirement, the third division, caters to both individual retirees and institutional clients such as pension schemes. This includes products and services such as lifetime mortgages, individual annuities, and defined benefit solutions.

Organisational structure

L&G adopts a diversified and decentralised managerial structure, which promotes faster decision-making. The company's efforts are guided by its Executive and Group Boards, who oversee operations and dictate the strategic direction.

John Kingman, one of the UK's leading financiers, is the Group Chairman, while Nigel Wilson currently serves as the Group Chief Executive. Each division within L&G has its leaders working in conjunction with the central administration.

Ethical undertaking

L&G's operations don't only hinge on financial returns but also advocate responsible and ethical business practices. Their commitment to ethical undertakings is evident in their stalwart support for socially beneficial projects like affordable housing, renewable energy, urban regeneration, and clean technology.

As a signatory of the UN Principles for Responsible Investment, the company leverages its scale and influence to drive positive societal change and sustainable development.

Financial performance: Legal & General share price

L&G has consistently showcased strong financial performance, growing consistently even amidst economic volatility. For instance, in 2020, amid the global pandemic, the company reported robust operational and financial resilience.

Although gross written premiums and operating profits experienced a dip due to the pandemic's unprecedented challenges, the overall annual profit remained resilient.

As of 2020, L&G managed around £1.28 trillion in assets and had a reported revenue of £44.1 billion. Furthermore, L&G has maintained a steady dividend payout, showcasing its financial stability and rewarding its shareholders consistently.

Legal & General Group PLC (LGEN: LSE) reported a resilient financial performance for the first half of 2023, with an operating profit of £941 million, a slight decrease from £958 million in the first half of 2022. The company's Solvency II coverage ratio improved to 230%, up from 212% in the previous year, indicating a strong surplus of £9.2 billion.

The interim dividend increased by 5% to 5.71p. Legal & General's capital generation for the period was £947 million, keeping them on track to meet their five-year ambitions, with a projected capital generation of £8.0-9.0 billion and dividends of £5.6-5.9 billion by 2024​​.

The operational performance across various divisions showed mixed results; Legal & General Retirement Institutional (LGRI) saw a 19% increase in operating profit, while Retail and Legal & General Investment Management (LGIM) experienced decreases in their operating profits due to competitive pressures and the impact of rising interest rates.

Legal & General Capital: Legal & General Share Price

Legal & General Capital (LGC), on the other hand, enjoyed a 13% increase in its operating profit, driven by its alternative asset portfolio​​​​.

Solvency II operational surplus generation remained stable at £947m, with the company operating a capital-light PRT business and maintaining the capacity to write substantial UK PRT volumes. The IFRS return on equity was 13.0%, affected by unrealised mark-to-market impacts of investment variances. Before these variances, the return on equity would have been 37.1%​​.

Legal & General's strategy focuses on asset origination and management, as well as providing retirement and protection solutions, positioning them well to capitalise on market opportunities across their divisions​​.

The company also emphasises its commitment to sustainability and inclusive capitalism, aiming to invest in ways that benefit society long-term and create value for shareholders. They have undertaken initiatives to reduce their carbon intensity and invested significantly in clean energy and social infrastructure

Final thoughts

Legal & General Group Plc is more than just a financial institution; it is a cornerstone of British financial history and an icon of global finance. With strategic divisions focusing on varied but interconnected financial areas and its commitment to ethical investments, the company remains a major force driving both economic and societal impacts.

Despite various market challenges, L&G's longevity and consistent growth demonstrate the strength and reliability of its business model.

The company continues to champion the cause for a sustainable future, leveraging its influence and resources to underpin the real economy while ensuring its clients' financial health and prosperity.

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