Legal & General has brokered a deal to sell its US insurance business to Japan’s Meiji Yasuda for $2.3bn in cash, as chief executive António Simões moves to overhaul the insurer.
L&G said on Friday it would sell its US protection business, which offers life insurance policies and pays out when employees get ill.
The Japanese group will also take a 20 per cent economic interest in L&G’s US pension risk transfer — or bulk annuity — business, which takes on pension obligations from companies selling their schemes. L&G will keep 80 per cent exposure to existing and new corporate pension deals through reinsurance arrangements.
Additionally, Meiji Yasuda plans to acquire a stake of about 5 per cent in L&G.
Shares in L&G rose as much as 8 per cent in early trading in London on Friday after it announced the transaction and signalled that it would buy back an extra £1bn of shares after the sale has completed.
L&G said it planned to return 40 per cent of its £15bn market capitalisation to shareholders over the next three years through a combination of dividends and share buybacks.
The sale is Simões’ latest step to slim down L&G since he joined last year from Spanish bank Santander and unveiled a major overhaul aimed at simplifying the business. L&G sold its UK housebuilder Cala in a £1.4bn deal last year as part of the plan.
Simões said the sale of the US business would allow the company to strengthen its pension risk transfer and asset management divisions in the country. Speaking to the Financial Times, he said L&G was planning further US acquisitions in its asset management business, focused on real estate, private credit, and infrastructure.
L&G said it would put about £400mn from the transaction towards growing its bulk annuity business in the US, which Simões said was a “key market” for its pension risk transfer business.
The FTSE 100 group already dominates the UK bulk annuity market, and has written more than $12bn of bulk annuity deals in the US since it entered that market in 2015.
Simões said he would grow the US business organically and through bolt-on acquisitions and would continue to focus on increasing L&G’s US private market portfolio after taking a stake in Boston-based real estate firm Taurus last year.
Analysts including Nasib Ahmed of UBS welcomed the deal, putting it at a price-to-earnings ratio of close to 30 times which “looks attractive”.
