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Is Legal & General Group plc Set For Electrifying Earnings Growth In 2014?

Today I am looking at Legal & General Group’s (LSE: LGEN) (NASDAQOTH: LGGNY.US) earnings prospects for 2014.

Business continues to boom

I believe that the eye-popping rate at which Legal & General continues to generate new business is a great omen for the coming year. The firm announced in November’s interims that gross inflows advanced 71% during July-September to £15.4bn, indicating that recent inflows have accelerated when tallied up against growth of 65% during the first nine months of 2013.

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In particular, Legal & General is set to benefit from the raft of small-to-medium-sized businesses ready to accept pension auto-enrolment over the next 12 months, with adoption across large companies surpassing many predictions. Indeed, the Chartered Institute of Personnel and Development (CIPD) says that opt-out levels are running at less than 10%.

As well, Legal & General is also well placed to carry out further M&A activity in the very near future. Indeed, the insurance giant has a lot of cash burning in its pocket, with net cash leaping 20% during July-September to £740m.

Legal & General made four acquisitions during 2013 — including the spring purchase of Cofunds, the country’s largest digital savings platform — and rumour has it that the insurer has drafted in Goldman Sachs to advise it on a possible bid for the Co-operative Group’s insurance arm.

Following last year’s 12% earnings advance, City analysts expect the firm to punch another double-digit rise in 2013, up 13% to 15.7p per share. Growth is expected to slow in 2014 but remain robust, with a 9% improvement pencilled in to 17.9p.

These projections leave the company changing hands on a P/E rating of 12.6 for next year, easily surpassing a prospective average of 14 for the complete life insurance sector. With signs that the economic recovery in its core UK market is recovering, I expect Legal & General’s earnings outlook to improve markedly not just next year but well into the future.

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> Royston does not own shares in Legal & General Group.