REG - Legal & General Grp - Sale of US Protection; new strategic partnership

Legal & GeneralAnnouncement

07/02/2025 07:00

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RNS Number : 3275W  Legal & General Group Plc  07 February 2025

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

L&G announces the sale of its US protection business to Meiji Yasuda, and
the creation of a long-term strategic partnership, for a valuation of $2.3bn

 ·             Longstanding partner Meiji Yasuda has agreed to purchase L&G's US
               protection business and to establish a strategic partnership with L&G to
               grow the US Pension Risk Transfer business (taking a 20% interest in L&G's
               US PRT business) for a combined equity value of $2.3bn (£1.8bn(( 1  (#_ftn1)
               )))
 ·             Meiji Yasuda intends to acquire a c. 5% shareholding in Legal & General
               Group plc(( 2  (#_ftn2) )) and to build on its existing partnership with
               L&G in asset management
 ·             L&G anticipates an additional share buyback of £1.0bn following
               completion(( 3  (#_ftn3) )) and now expects to return the equivalent of c. 40%
               of its market cap to shareholders over 2025-2027 through a combination of
               dividends and buybacks

L&G Group CEO, António Simões, and Group CFO, Jeff Davies, will host a
virtual investor presentation at 9am this morning (Friday 7 February 2025).
You can access the virtual call here
(https://group.legalandgeneral.com/en/investors) and the presentation slides
will be made available online shortly beforehand (at the same link).

The Transaction

Legal & General Group Plc ("L&G" or the "Group") today announces that
it has agreed the sale of its US insurance entity(( 4  (#_ftn4) )), comprising
its US protection and US Pension Risk Transfer ("US PRT") businesses, to Meiji
Yasuda Life Insurance Company ("Meiji Yasuda"), a Japanese mutual life
insurance company, for an equity value of $2.3bn (£1.8bn) payable in cash at
completion (subject to certain purchase price adjustments) (the
"Transaction"). 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.

Under the terms of the Transaction, the equity value of $2.3bn represents a
compelling multiple to estimated 2024 post-tax earnings.

The Transaction is expected to complete towards the end of 2025 and is subject
to customary closing conditions and regulatory approvals.

The Group also announces the formation of a long-term strategic partnership
with Meiji Yasuda to support L&G's growth ambitions in US PRT and asset
management:

 ·             Meiji Yasuda intends to acquire a c. 5% shareholding in L&G, deepening the
               strong corporate relationship and bringing closer alignment of interest
               between the two companies.
 ·             L&G and Meiji Yasuda will partner to drive growth in the US PRT business.
 ·             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.

Use of Proceeds

L&G will receive estimated proceeds of $2.3bn (£1.8bn) on completion of
the Transaction. Approximately £400m will be used to fund the US PRT
reinsurance arrangement described above, and the remainder will be deployed in
line with the Group's capital allocation framework.

In line with that framework, it is the Group's current intention, subject to
market conditions and regulatory approval, to return £1.0bn to shareholders,
which represents more than half of the Transaction proceeds. This would be
incremental to the Group's existing distribution policy. L&G therefore
expects to return the equivalent of c. 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.

The Transaction will increase the Group's Solvency II ratio by approximately
22% at completion, and by approximately 7% post the proposed buyback.

Strategic Rationale

The Transaction supports L&G's long-term strategic goals as set out at the
Capital Markets Event ("CME") on 12 June 2024. Since then, L&G has made
significant progress in implementing its strategy, including new senior
management appointments, the sale of Cala and the strategic investment in
Taurus Investment Holdings.

This Transaction demonstrates continued momentum in executing the strategy. We
are committed to growing internationally and this partnership will support
growth in our US PRT and global (including US) asset management propositions
while delivering increased returns to shareholders. It will also provide
capital to invest for growth across L&G's three synergistic core
businesses: Asset Management, Institutional Retirement and UK Retail.

We reiterate the guidance for full year 2024 of mid-single digit growth in
core operating profit, and confirm we are on track to achieve the Group
targets set out at the CME:

·      6-9% CAGR in core operating EPS (2024-27)

·      >20% operating Return on Equity (2025, 2026, 2027); and

·      £5-6bn cumulative Solvency II capital generation over three
years (2025-2027).

 

We will include the anticipated capital generation of the Transaction of
approximately £1.2bn in the calculation for Solvency II capital generation
target, as the Transaction will accelerate the expected future capital
generation of the US protection business.

We remain confident in meeting the targets that we set out at the CME for our
Institutional Retirement and Asset Management businesses, which remain
unchanged. We will update the target for our Retail business, to reflect the
sale of the US protection business, at our Retail investor deep dive event
planned for H2 2025.

António Simões, Group Chief Executive Officer of Legal & General said:

"This is a transformative transaction that brings significant strategic and
financial benefits to the Group and demonstrates our commitment to deliver on
our strategy - sharpening our focus on core businesses, leveraging the
synergies between them, and driving sustainable growth to enhance shareholder
returns.

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.

Today's announcement reflects our commitment to value creation and shareholder
returns as we expect to distribute c. 40% of our market cap through dividends
and share buybacks over the next three years."

Hideki Nagashima, President and Group CEO of Meiji Yasuda Life Insurance
Company said:

"We are pleased to announce this landmark transaction, which will accelerate
Meiji Yasuda's international growth strategy - strengthening our position in
the US life insurance market, deepening our long-standing partnership with
L&G in asset management, and enabling access to the US PRT market, where
we will benefit from L&G's market-leading expertise to unlock sustainable
growth together.

Our intention to acquire a 5% shareholding in L&G reflects our confidence
in their leadership, strategy and long-term prospects."

Additional Financial Information

Key financial information:

 •    The US protection business is expected to generate operating profits of c.
      $90m in 2024 ($34m in 2023).
 •    The anticipated 2024 US statutory net assets of the businesses being sold is
      c. $850m.
 •    The IFRS profit on completion of the Transaction is expected to be greater
      than £1.0bn.
 •    In the 12 months to 31 December 2024, US protection and 20% of the US PRT
      business are expected to generate c. £350-400m of Operational Surplus
      Generation, driven largely by realising benefits in the back book on writing
      new US protection business.  After allowing for anticipated new business
      strain, we expect a Net Surplus Generation ("NSG") of c. £200-250m. The
      anticipated capital generation of approximately £1.2bn resulting from the
      Transaction represents a multiple to expected NSG of c. 5 times.

Inside Information

The information contained within this announcement is deemed by Legal &
General Group Plc to constitute inside information for the purposes of Article
7 of the Market Abuse Regulation (EU) No 596/2014 (as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act 2018). By the
publication of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public domain. The person
responsible for making this announcement on behalf of Legal & General
Group Plc is Geoffrey Timms.

 

Enquiries

Investors

Michelle Moore, Group Strategy & Investor Relations Director

investor.relations@group.landg.com (mailto:investor.relations@group.landg.com)

+44 20 3124 3773

 

Gregory Franck, Investor Relations Director

investor.relations@group.landg.com (mailto:investor.relations@group.landg.com)

+44 203 124 4415

 

Media

Natalie Whitty, Group Corporate Affairs Director

Natalie.Whitty@group.landg.com (mailto:Natalie.Whitty@group.landg.com)

+44 738 443 5692

 

Lucy Legh / Nigel Prideaux / Charlie Twigg, Headland Consultancy

LandG@headlandconsultancy.com (mailto:LandG@headlandconsultancy.com)

+44 20 3805 482

 

Notes to Editors

About Legal & General

Established in 1836, Legal & General is one of the UK's leading financial
services groups and a major global investor, with £1.2 trillion in total
assets under management (as at HY24) of which c. 40% (c. £0.5 trillion) is
international.

We have a highly synergistic business model, which continues to drive strong
returns. We are a leading international player in Institutional Retirement, in
Retail Savings and Protection, and in both public and private markets through
our Asset Management division. Across the Group, we are committed to
responsible investing and dedicated to serving the long-term savings and
investment needs of customers and society.

As at 6 February 2025, Legal & General has a market capitalisation of
£14.1 billion.

 

About Meiji Yasuda Life Insurance Company

Meiji Yasuda Life Insurance Company is headquartered in Tokyo, and is the
oldest and one of the major life insurance companies in Japan. It provides a
variety of group and individual life insurance products, bancassurance, and
group annuity products in Japan. It also has insurance operations in the US,
Poland, Thailand and China. Additional information about Meiji Yasuda can be
found at http://www.meijiyasuda.co.jp/english/
(http://www.meijiyasuda.co.jp/english/) .

 

About Legal & General America

Legal & General America's individual life insurance division is part of
the worldwide Legal & General Group. For over 70 years, the Legal &
General America companies have been in the business of providing financial
protection through life insurance for American families. The Legal &
General America companies are Banner Life Insurance Company and William Penn
Life Insurance Company of New York. With more than $105 billion in new
coverage issued in 2023, LGA is a top three US term life insurance provider
with 1.4 million U.S. customers. LGA shares Legal & General's independent
financial strength ratings: A+ Superior from A.M. Best and AA- Very Strong
from Standard and Poor's and Fitch. For more information, please visit
https://www.lgamerica.com (https://www.lgamerica.com) .

 

About Legal & General Retirement America

Legal & General Retirement America specializes in customized pension risk
solutions for institutional clients in the US market. Established in 2015,
Legal & General Retirement America is a business unit of Legal &
General America, Urbana, MD. Legal & General America life insurance and
retirement products are underwritten and issued by Banner Life Insurance
Company, Urbana, MD and William Penn Life Insurance Company of New York,
Valley Stream, NY. Banner products are distributed in 49 states, the District
of Columbia and Puerto Rico. William Penn products are distributed exclusively
in New York; Banner Life is not authorized as an insurer in and does not do
business in New York. The Legal & General America companies are part of
the worldwide Legal & General Group.

 

Forward-looking statements

This announcement may contain certain forward-looking statements relating to
Legal & General, its plans and its current goals and expectations relating
to future financial condition, performance and results. By their nature,
forward-looking statements involve uncertainty because they relate to future
events and circumstances which are beyond Legal & General's control,
including, among others, UK domestic and global economic and business
conditions, market related risks such as fluctuations in interest rates and
exchange rates, the policies and actions of regulatory and Governmental
authorities, the impact of competition, the timing impact of these events and
other uncertainties of future acquisitions or combinations within relevant
industries. As a result, Legal & General's actual future condition,
performance and results may differ materially from the plans, goals and
expectations set out in these forward-looking statements and persons reading
this announcement should not place reliance on forward-looking statements.
These forward-looking statements are made only as at the date on which such
statements are made and Legal & General Group Plc does not undertake to
update forward-looking statements contained in this announcement or any other
forward-looking statement it may make.

No statement in this announcement is intended as a profit forecast, profit
estimate or quantified financial benefits statement for any period and no
statement in this announcement should be interpreted to mean that earnings or
earnings per share for the Legal & General for the current or future
financial years would necessarily match or exceed the historical published
earnings or earnings per share of Legal & General.

 

Rounding

Certain figures included in this announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different parts of this announcement may vary slightly and figures shown as
totals in certain parts of this announcement may not be an arithmetic
aggregation of figures that precede them.

 

 

 

 

 1  (#_ftnref1) Based on USD FX rate of 1.24 as at 6 February 2025.

 2  (#_ftnref2) Through market purchases.

 3  (#_ftnref3) This buyback would be incremental to the Group's existing
distribution policy and is subject to market conditions and regulatory
approval.

 4  (#_ftnref4) To be implemented by the Group disposing of all of the shares
held in Legal & General America Inc, the parent company of Banner Life and
William Penn, which write L&G's US protection and US PRT business.

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