Legal & General (L&G) has sold its US insurance business to Japanese firm Meiji Yasuda for £1.8bn with boss António Simões describing the deal as a “transformative transaction”.
Following the deal, Meiji Yasuda will own L&G’s US protection business and have a 20 per cent economic interest in its pension risk transfer (PRT) business.
The FTSE 100 firm will retain 80 per cent of existing and new PRT through reinsurance arrangements. PRT involves buying up pension liabilities from corporate pension schemes.
L&G said the £1.8bn valuation represents a “compelling multiple” to expected 2024 earnings.
The protection business is expected to generate operating profits of around $90m in 2024, while its anticipated net assets are around $850m.
£400m of the proceeds will be reinvested in the PRT business while £1bn will be paid back to shareholders.
“This would be incremental to the group’s existing distribution policy. L&G therefore expects to return the equivalent of c. 40 per cent of its market cap to shareholders over 2025-2027 through a combination of dividends and buybacks,” it said.
The remaining £400m will be redeployed in line with the strategy announced last summer. The deal is expected to be completed towards the end of 2025.
Meiji Yasuda also intends to acquire a roughly five per cent shareholding in L&G, with the two firms set to work closely together on both PRT and global private assets.
“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 PRT while driving scale and profitability in global asset management,” Simões said.
Simões, who took over from long-time boss Nigel Wilson last January, is attempting to streamline L&G’s business model.
Under plans announced last summer, Simões committed to ramping up the firm’s lucrative PRT business and merge its two asset management arms, L&G Investment Management and Legal & General Capital.