Legal & General is selling its US protection business to Japan-based insurer Meiji Yasuda as part of a transaction worth around £1.8bn ($2.3bn).
A 20% stake in L&G’s US pension risk transfer (PRT) business and creation of a strategic partnership between the pair is also part of the deal while the UK insurer added it will be returning a further £1bn to shareholders through an additional share buyback.
The US protection business earned gross premiums of £1.27bn in 2023, up from £1.22bn in 2022 and created $175m of new business premium in 2023, according to L&G’s most recent annual results.
L&G said the US protection business was expected to create an operating profit of around $90m in 2024, almost treble the $34m generated in 2023.
“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,” L&G said.
L&G’s shares leapt on the news from a closing price of 238p to open at 257p, but have since eased slightly to 253p.
Meiji Yasuda also intends to acquire a 5% shareholding in Legal & General Group plc and to build on its existing partnership with L&G in asset management.
‘Transformative transaction’
Legal & General group CEO António Simões 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,” he added.
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.”
