7th Feb 2025 08:39
(Alliance News) - Shares in Legal & General Group PLC jumped on Friday after it said it would return an extra GBP1 billion to shareholders after agreeing to offload its US insurance entity.
Shares in L&G jumped 6.1% to 253.50 pence each in London on Friday morning. The wider FTSE 100 was down 0.1%.
The London-based insurer is selling the US business for USD2.3 billion to Japanese mutual life insurance firm Meiji Yasuda Life Insurance.
The duo will establish a "strategic partnership" and Meiji Yasuda may snap up a stake in L&G.
The FTSE 100 listing said more than half of the deal proceeds will be returned to shareholders. L&G expects the transaction to complete towards the end of 2025.
Chief Executive Antonio Simoes called it a "transformative transaction" that brings "significant strategic and financial benefits".
"This strategic partnership brings together two highly complementary global businesses, with a shared ambition for growth, and will enable us to capitalise on the large market opportunities in US pension risk transfer while driving scale and profitability in global asset management," he added.
The US insurance entity includes L&G's US protection and US pension risk transfer arms.
The anticipated 2024 US statutory net assets of the businesses being sold is around USD850 million, L&G said. It expects the IFRS profit on completion to be greater than GBP1.0 billion.
"Following completion, Meiji Yasuda will own L&G's US protection business and have a 20% economic interest in its US PRT business, with L&G retaining 80% of existing and new PRT through reinsurance arrangements between L&G and Meiji Yasuda," L&G explained.
L&G said a partnership with Meiji Yasuda will look to "support L&G's growth ambitions" in US pension risk transfer and in asset management.
In addition, Meiji Yasuda plans to acquire a roughly 5% stake in L&G, "deepening the strong corporate relationship and bringing closer alignment of interest between the two companies".
"Meiji Yasuda will expand its established partnership with L&G in asset management by outsourcing the investment management of US PRT and protection assets to L&G. In addition, the two companies will form a long-term partnership in global private assets. This will include significant co-investment into L&G's range of private assets capabilities over several years, supporting the group's ambition in this business," L&G added.
Around GBP400 million of the proceeds from the unit sale will fund the US PRT offering. It added that GBP1.0 billion, more than half the proceeds, will be returned to shareholders.
"This would be incremental to the group's existing distribution policy. L&G therefore expects to return the equivalent of [around] 40% of its market cap to shareholders over 2025-2027 through a combination of dividends and buybacks. The remaining net proceeds from the transaction would be retained and invested to support the delivery of the group's growth strategy," L&G said.
L&G said the deal will increase the Solvency II ratio by around 22% at completion, and by around 7% post the proposed buyback.
L&G reiterated its guidance for 2024. It still expects to report mid-single digit growth in core operating profit. In 2023, L&G reported operating profit of GBP1.67 billion.
By Jeremy Cutler, Alliance News reporter
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