Legal & General Sells US Insurance Business to Meiji Yasuda
Legal & General Group Plc (L&G) has announced an agreement to sell its US insurance business to Japan’s Meiji Yasuda Life Insurance Co for $2.3 billion. This significant transaction is part of L&G’s ongoing efforts to strategically realign its business portfolio.
The deal, announced recently, encompasses L&G’s US protection and pension risk transfer (PRT) operations. According to reports, Meiji Yasuda will gain full ownership of L&G’s US protection business and will also acquire a 20% economic stake in its US PRT unit. Furthermore, the Japanese insurer will purchase a 5% equity stake in L&G.
The transaction’s anticipated completion date is the end of 2025, pending regulatory approvals. L&G plans to allocate £1 billion ($1.24 billion) of the proceeds towards share repurchases. An additional £400 million will be allocated to a reinsurance arrangement, where L&G will maintain an 80% interest in the U.S. PRT business.
L&G’s chief executive, António Simões, emphasized the strategic and financial advantages of the deal with Meiji Yasuda. “This is a transformative transaction that brings significant strategic and financial benefits to the group, sharpening L&G’s focus on core businesses and driving sustainable growth to enhance shareholder returns,” Simões stated, according to Bloomberg.
Following the announcement, L&G shares saw a substantial increase, rising as much as 11.4% in early trading in London. This marked the most considerable single-day gain for the company since November 2020.
Strategic Reshaping
The sale is consistent with a broader shift in L&G’s overarching business strategy directed by Simões, who assumed the CEO position in 2023. Under his leadership, the company has been actively restructuring its portfolio to prioritize asset management, institutional retirement, and the UK retail sector. As part of this strategic transformation, L&G agreed last September to sell its UK homebuilder, Cala Group, for £1.16 billion. The company has stated that these strategic moves are designed to return more capital to shareholders between 2024 and 2027.
Meiji Yasuda’s Expansion Plans
For Meiji Yasuda, the acquisition represents a strategic move to expand internationally, particularly to address demographic trends within Japan. The Tokyo-based insurer has been actively pursuing opportunities abroad to offset the impacts of a shrinking domestic population. In a related development, its US subsidiary, StanCorp Financial Group Inc, is in the process of acquiring Allstate Corp’s benefits unit for approximately $2 billion.
Market and Financial Impact
Analysts at RBC, led by Mandeep Jagpal, commented in a research report that they anticipated a “minimal” financial impact from L&G’s reduced involvement in the US PRT market. The firm had previously categorized the US protection business as having a lower strategic significance relative to other business segments.
L&G has indicated that, following the completion of the sale, the company anticipates returning approximately 40% of its then-current market capitalization to shareholders between 2025 and 2027 through a combination of dividends and share buybacks. The company reiterated its 2024 earnings guidance, projecting mid-single-digit growth in core operating profit. With this divestment, L&G intends to centralize capital and resources on its primary business segments, reinforcing its emphasis on asset management and long-term savings products within the UK market.
