The Legal & General (LSE: LGEN) share price is lower today than it was back in 2015. It did break above 300p in early 2020, just before the pandemic, but since then it has largely been drifting.
This year, chief executive Sir Nigel Wilson announced his retirement after more than 10 years at the helm. He is due to step down in January, after which António Simões will take over at the FTSE 100 insurance and asset management group.
Could this change of leadership reinvigorate the share price? Let’s discuss.
Who is the new boss?
António Simões will join L&G from Banco Santander, where he has been regional head of Europe since September 2020.
In this role, he leads the bank’s businesses in the UK, Spain, Portugal, and Poland. Prior to joining Santander, he spent 13 years at HSBC.
Simões said:
Legal & General is a great company with an iconic, highly respected brand, strong financial track record and a deep-rooted commitment to social purpose…This is a critical time for our industry, clients and customers, with emerging technologies, changing societal dynamics and wider economic forces presenting new challenges and opportunities.
The appointment of an external candidate surprised some analysts, especially given the fact that his background is in banking rather than insurance specifically.
Discounted stock
The investment case for the stock has long been about income. Yet the business is hardly growing at a snail’s pace.
In 2022, its operating profit increased 12% year on year to £2.52bn. Cash generation of £5.1bn and capital generation of £4.9bn are expected to increase to between £8bn and £9bn by 2024.
The company retains a strong balance sheet, is growing internationally, and has deep experience and knowledge of its markets.
Yet the shares remain extremely cheap, and currently trade on a price-to-earnings (P/E) multiple of 6.6.
That dirt-cheap valuation means the stock is trading at a discount to other European insurers. For example, Frankfurt-listed Allianz currently trades on a P/E of 10.5.
This share price discount can be seen in the respective dividend yields. Allianz stock carries a yield of 5.4% compared to 8.4% for L&G.
Back above 300p?
So, could the new chief executive help narrow this discount next year?
Ultimately, of course, nobody knows, and any new leadership appointment brings a certain level of risk.
That said, we know L&G is targeting the growth of its overseas operations, and Simões certainly has vast international experience from his current and previous roles. I think his experience of working across complex, global organisations like Santander and HSBC makes him an ideal choice to spearhead international expansion.
He’s also known for being a strong advocate of diversity in society. Therefore, it seems likely he will continue the ‘inclusive capitalism’ pioneered by his predecessor.
This has involved the company pouring billions into projects such as housing regeneration, education, climate change, tackling inequality and encouraging social mobility.
Finally then, I wouldn’t be surprised to see the share price rise above 300p if investors start appreciating the company’s international growth opportunities. Perhaps the new CEO will be the person to convince them.
Either way, I believe the stock offers incredible value, which is why I’m contining to add to my holding.
