You can buy L&G either directly (OTCPK:LGGNF) or through an ADR (American Deposit Right) (OTCPK:LGGNY). One ADR represents 5 shares of L&G. They are quoted in USD and for US investors, they are generally easier and cheaper to buy than buying the shares directly. ADRs also pay the dividend in USD, which could reduce the cost of converting dividend payments into GBP. They are sometimes traded at a small premium or discount. Legal & General Group plc, commonly known as Legal & General, is a British multinational financial services and wealth management company headquartered in London, England. Products and services include investment management, life mortgages (a form of share release), annuities, annuities and life insurance. From January 2020, it will no longer offer non-life insurance following the sale of Legal & General Insurance to Allianz. [3] The firm operates in the UK and US, with investment management firms in the Gulf, Europe and Asia.
[1] The gap between what the government spends and its tax revenues “There are now also questions about risk management and governance processes around the PGI in general, both among pension funds and asset managers.” Legal & General was founded in June 1836 by Sergeant John Adams and five other lawyers in a café in Chancery Lane. [6] Originally called the New Law Life Assurance Society, the Society was limited to lawyers. The name was changed to Legal & General Life Assurance Society to reflect the fact that the policies were available to the general public, but ownership of the shares was limited to lawyers. The group expanded into the UK and soon began acquiring foreign life insurance companies by buying a retirement business from the Metropolitan Life Assurance Company of New York in the 1930s. [6] Such measures can clearly have a significant impact on investor returns. However, this is a very strong move, most likely related to the overall strength of the dollar, as the Fed has taken strong action, which is certainly an abnormal situation. Given the catastrophic situation in the UK and based on recent comments from the BoE, experts have been very cautious about the pound lately. We can very well expect further weakness during the current crisis. In the longer term, the situation is less dramatic: while it has been relatively stable for decades over the past decade, the pound has begun to fall significantly.
Ten years ago, a pound was worth $1.60. Now it`s only worth $1.07. This corresponds to a loss of more than 33% or nearly 4% annual decline. However, most of this decline occurred last year. In the previous 9 years, it only fell by about 14% or about 1.6% per year. At the moment, it looks a lot like the first half of the 80s under Volcker. The dollar also rose dramatically, even ending at the same level we are now. In the second half of the 80s, this trend was reversed.
Whether this is repeated is a guess, but I think the 4% annual loss is too high a long-term assumption as it reflects the strong movements of the last twelve months. I think if you take the last 30 years, when the pound was trading around 1.70-1.80 in the early 90s, until now, you give a good idea of what to expect. It includes both the famous Black Wednesday of the early 90s and the current weakness, but spans a 30-year period. This gives me an annual depreciation of about 1.6% against the USD. I think it`s wise to subtract this from the return expectations of a U.S.-based investor. If one wants to be compensated for the additional currency risk, one can also add another margin of safety of 0.9%, for an additional obstacle of 2.5% to invest in L&G as a US investor. I will first give a brief introduction to Legal & General. Next, I will explain what happened in the UK, that the Bank of England had to intervene to prevent a market collapse, and how this could benefit L&G.
Finally, I will consider L&G as an investment and analyze its valuation, expected returns and associated risks. All data are presented in pounds sterling (GBP), unless otherwise stated, and refer to the share quoted in the United Kingdom. An ADR (OTCPK:LGGNY) is available to U.S. investors. I hope I found L&G to be fundamentally an attractive buy based on expected returns. I`m usually not a big fan of market timing. But in my experience, there are a few exceptions: regardless of what the experts tell you, it`s generally not a good idea to buy REITs in a sharply rising interest rate environment, as many have experienced now, and it`s not wise to buy in finances if you`re expecting a severe recession. Overall, L&G appears to be cautiously positioned to deal with negative economic conditions. As for dividend security, they cut their dividend by a third in 2008/9, but in 2011 it was already 7% higher than in 2007. During the pandemic, they defied regulators` demands to cut/omit their dividend and kept it stable. They currently pay out about 2/3 of the capital they generate, which should give them sufficient coverage under normal circumstances. However, the outlook for the UK is bleak and I am personally a bit concerned that there could be some surprising negative exposures of LGC.
There, they aim for returns of 10 to 12%, which includes activities such as builders or venture capital. I just don`t know if I like it when my insurance company owns and operates a residential construction business in today`s environment. Additional information: I am an independent retail investor who shares personal opinions based on publicly available information.
