Should I Buy Legal & General Group?

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It's time to go shopping for shares again, but where to start? Stricken gas giant BG Group? Pipeline prince National Grid? Or oil major Royal Dutch Shell?

There are loads of great stocks to choose from, and I've got my wallet out. So here's the question I'm asking right now: Should I buy Legal & General Group (LSE: LGEN.L  ) ?

Delayed gratification
I've been meaning to buy Legal & General Group for years. So many chances, so many missed opportunities. So what made me think of L&G now? Well, for a start, it has just delivered a record third quarter, on top of record sales year to date. Downturn? What downturn? Unsurprisingly, management is feeling optimistic, spying attractive growth opportunities in all its various markets. L&G Investment Management did particularly well, with net inflows up 28% on last year to 533 million pounds. Elsewhere, annuity sales were up 10%. Protection sales were up around 30% in both the U.K. and U.S. Group chief executive Nigel Wilson was happy: "Legal & General has delivered sustainable growth in cash and dividends. We are starting to accelerate the evolution of our business; our aim now is to translate strong operating performance into strong earnings growth."

Foreign affairs
L&G knows these are challenging times, both at home and abroad, but this makes its recent results even more impressive. Investors will be hoping the insurer can do even better once the global recovery kicks in (if it does kick in -- assume nothing these days). The group is also looking to diversify overseas, which interests me. Its two biggest rivals, Aviva and Prudential, have already set course for foreign shores. With mixed results, by the way, with Aviva shipping water while Prudential steams ahead. Empire building isn't a sure-fire strategy for success, but it is good to see a bit of ambition.

Lots to like...
There is plenty to like about L&G. It boasts a strong balance sheet. Its domestic market is growing, as an aging population seeks "retirement solutions," to use the industry jargon. And it will benefit from government plans to push workplace pensions via auto-enrollment, which is already pushing up L&G's pension assets. The stock also yields 4.5%, is covered 1.9 times, and management has adopted a progressive dividend policy. Trading on a price-to-earnings ratio of 10.2 for December 2012, it isn't massively expensive either.

...and little to loathe
It isn't all gravy. If the economy worsens, L&G's customers will have less money to save. The impact of the government's financial advice overhaul, the Retail Distribution Review, remains uncertain. If we are in the middle of a bond bubble, insurers generally could go pop. And L&G has a long way to go to match rival Prudential in gaining exposure to the faster growth potential of Asia and emerging markets. Some investors might want to hang on for a market dip, but I've waited long enough. L&G looks like a buy to me.

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Harvey owns shares in Aviva, Prudential and Royal Dutch Shell. He doesn't own any other shares mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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