Legal & General sells US insurance business for £ 1.8 billion

Shares in Legal & General (L&G) increased after the company announced the sale of its US insurance business to the Japanese company Meiji Yasuda for £ 1.8 billion.

Follow the trade, Meiji Yasuda will own L & G’s US protective business and have a 20 percent financial interest in his pension risk (PRT) business.

The FTSE 100 company will retain 80 percent of existing and new PRT through reinsurance schemes. PRT involves buying pension obligations from corporate pension schemes.

L&G said the valuation of $ 1.8 billion Pounds represent a “compelling multiple” for expected 2024 earnings.

The protective company is expected to generate the operating profit of about $ 90 million. By 2024, while its expected net assets are around $ 850 million.

400 million Pounds of the proceeds are reinvested in the PRT business, while £ 1 billion Paid back to the shareholders.

“This would be step by step for the group’s existing distribution policy. L&G therefore expects to return the equivalent with c. 40 percent of its market cap to shareholders over 2025-2027 through a combination of dividends and repurchases, ”it said.

The remaining £ 400m will be redistributed in accordance with the strategy announced last summer. The trade is expected to be completed by the end of 2025.

Shares in the company rose over eight percent in early trade. “This is a transformation agreement from new CEO Antonio Simoes,” said Abid Hussain, an analyst at Panmure Liberum.

Meiji Yasuda also intends to acquire an approx. Five percent shareholding in L&G, where the two companies are ready to work closely together with both PRT and global private assets.

“This strategic partnership brings together two very complementary global companies with a common ambition for growth and will enable us to exploit the great market opportunities in the US PRT while driving and profitability in global asset management,” Simões said.

Simões, who took over from long -time boss Nigel Wilson last January, is trying to streamline L & G’s business model.

According to plans announced last summer, Simões undertook to increase the company’s lucrative PRT business and merge its two asset management arms, L&G Investment Management and Legal & General Capital.