Shares in Legal & General (L&G) surged following the announcement of its US insurance business's sale to Japanese company Meiji Yasuda for £1.8bn.
As a result of the transaction, Meiji Yasuda will acquire L&G’s US protection business and hold a 20% economic interest in its pension risk transfer (PRT) business, as reported by .
The FTSE 100 firm will retain 80% of existing and new PRT through reinsurance arrangements, with PRT involving the purchase of pension liabilities from corporate pension schemes.
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L&G stated that the £1.8bn valuation offers a "compelling multiple" to projected 2024 earnings.
The protection business is forecasted to yield operating profits of approximately $90m in 2024, while its expected net assets are around $850m.
Of the proceeds, £400m will be reinvested in the PRT business, while £1bn will be returned 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 accordance with the strategy announced last summer.
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The deal is anticipated to be finalised towards the end of 2025. Shares in the firm rose by over eight per cent in early trade.
"This is a transformational deal by the new CEO Antonio Simoes," commented Abid Hussain, an analyst at Panmure Liberum.
Meiji Yasuda is poised to take a stake of about five per cent in L&G, with plans for the two companies to join forces on Pension Risk Transfer (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," commented CEO Simões.
The new leader at L&G, Simões, who succeeded long-time chief Nigel Wilson in January last year, is steering the firm towards a more focused business strategy.
Following declarations made last summer, Simões has pledged to bolster the company's profitable PRT segment and consolidate its asset management divisions, L&G Investment Management and Legal & General Capital.