Legal & General Group PLC, the prominent UK-based financial services firm, recently announced its agreement to sell its US protection business to Japanese insurer Meiji Yasuda Life Insurance Company for approximately $2.3 billion. This landmark deal, revealed on Friday, not only marks the end of Legal & General's ownership of its US protection sector but also signifies the formation of a long-term strategic partnership between the two companies.
Following the completion of the sale, which is expected to finalize by the end of 2025, Meiji Yasuda will own Legal & General's US protection business and gain a 20% stake in its US pension risk transfer (PRT) operations. Legal & General will maintain the remaining 80% through innovative reinsurance agreements with its new Japanese partner.
This significant move allows Legal & General to sharpen its focus on core business areas, as highlighted by António Simões, the Group CEO. "This is a transformative transaction... 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 improve shareholder returns," stated Simões during the announcement.
Part of the proceeds from the deal, around £400 million (approximately $488 million), will be earmarked for funding the reinsurance arrangements associated with the PRT segment. The company indicated it plans to return £1 billion to shareholders over the next few years through share buybacks, equaling around 40% of its current market cap.
The contract also aims to bolster Legal & General's overall strategy within the US pension risk transfer market—an area projected to see considerable growth as traditional defined-benefit pension plans undergo significant capital transfers to insurers. Simões has previously referred to this as the beginning of what he describes as the "golden era" for PRT.
Meiji Yasuda’s acquisition strengthens its position within the US life insurance market and overlaps with existing collaborations with Legal & General. The two firms have worked closely over the years, particularly within the asset management arena, which positions both to leverage each other's strengths more effectively.
Hideki Nagashima, president and group CEO of Meiji Yasuda, expressed optimism over the new partnership. "Our ability to access the US PRT market, where we will benefit from L&G’s market-leading expertise, will help us achieve sustainable growth together. Our intention to acquire a 5% stake in L&G reflects our confidence in their leadership, strategy, and long-term prospects," Nagashima stated.
The deal has led to notable market reactions as well. Shares of Legal & General surged by 8.2% following the announcement, indicating strong investor confidence. The market's response suggests approval of the direction Legal & General is taking under Simões's leadership.
Legal & General has previously emphasized its commitment to meaningful shareholder returns. Following the transaction, projected returns to shareholders will include plans for dividends totaling about £3.6 billion alongside multiple buyback strategies to solidify existing investor relationships.
Simões and his team have laid out ambitious growth plans, which include completing £65 billion worth of pension transfer deals by 2028. The collaboration with Meiji Yasuda enhances this vision by affording them opportunities to expand within the vast US insurance ecosystem.
This alliance is yet another step for Meiji Yasuda, which has built upon its international operations since its establishment. With the recent acquisition positioning it to broaden its influence, the partnership showcases the synergies possible between both giants of the insurance sector.
Overall, as Legal & General gears up for these transformative changes, the upcoming completion of this deal stands out as pivotal both for the company's future and the broader US pension risk transfer market. Legal & General's strategic focus and the support from Meiji Yasuda are expected to play integral roles as they navigate the competitive and fast-evolving financial landscapes.