LEGAL & GENERAL'S RETIREMENT SOLUTIONS INVESTMENT - LUCIDA PLC.
Legal & General Group Plc ("Legal & General" or the "Group") has today agreed to acquire the entire share capital of Lucida plc ("Lucida"), the closed UK annuity buy-out company with a portfolio of £1.4bn of annuity assets, from LCM Holdings Limited. The acquisition, by the Group's subsidiary Legal & General Assurance Society ("LGAS"), an AA- rated entity, for an estimated consideration of £151m, is expected to complete in Quarter 3 2013, subject to PRA and FCA approval.
Legal & General has identified retirement solutions as one of its five key themes for growth. This acquisition forms part of our strategy of accelerating our organic growth with bolt-on acquisitions. We delivered strong annuity sales in Q1 with record Q1 individual annuity premiums up 51% to £406m and £357m of bulk annuity premiums.
Lucida was founded in 2006 to focus on the bulk purchase annuity market. It implemented bulk annuity arrangements with the Merchant Navy Officers Pension Fund, New Ireland Assurance and the UK pension schemes of Morgan Crucible and Newell Rubbermaid. Lucida closed to new business in November 2012 and is currently responsible for over 31,000 pensions in payment.
The estimated cash consideration of £151m will be funded from surplus capital held within the Group. We expect operational and capital synergies, from Legal & General managing the business, will allow the release of approximately £66m of capital and reserves (after tax) immediately following completion. This gives a net acquisition price of around £85m. The net acquisition price represents 54% of the embedded value of Lucida, which is estimated to be £157m after capital and reserve releases.
Further significant capital synergies are expected following corporate restructuring anticipated in 2014.
The acquisition will deliver asset management and annuities administration synergies, is expected to be earnings accretive for Legal & General in its first year and exceeds our target return on economic capital.
Kerrigan Procter, Managing Director Annuities, Legal & General said:
"We identified retirement solutions as one of our five themes for growth, and I'm delighted today to be able to announce our first acquisition in this arena. So far this year we have completed the UK's largest ever longevity insurance deal, announced our first international BPA transaction and delivered record Q1 individual annuity premiums.
"This acquisition will benefit Lucida's customers, by providing them with the comfort of knowing their pensions will be paid by a longstanding, trusted and well capitalised business. Legal & General's annuity business has over 700,000 customers who rely on it for their pension income, and manages over £33bn in assets."
Wadham Downing, Group M&A Director, Legal & General said:
"We announced at our preliminary results our five key themes for growth. With today's announcement on Lucida, in addition to our acquisitions this year of Cofunds and CALA, we have now agreed bolt-on acquisitions in three of the five growth areas; digital, direct investments, and now retirement solutions. Going forward we will continue to enhance our strong organic growth story in these five areas with selected bolt-on acquisitions that meet our strategic and financial criteria."
-ENDS-
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Notes to editors:
1. Following completion, the annuity business acquired from Lucida will be reported as bulk purchase annuity new business for Legal & General.
2. LCM Holdings was advised by Barclays.
3. Legal & General Group Plc
Established in 1836, Legal & General is a leading provider of insurance, savings and investment management products in the UK. The Group has a market capitalisation of £10bn1 and is responsible for investing £441bn worldwide (as at 31 March 2013) on behalf of investors, policyholders and shareholders. Our Savings business has over £100bn2 of assets under administration and total UK Protection gross premiums were £325m in the first three months of 2013. We have over seven million customers in the UK for life assurance, pensions, investments and general insurance plans and almost one million customers in the US who rely on us for life assurance. In 2012, Legal & General's profits before tax (on the IFRS basis) were £1.1bn; earnings per share were 13.9p and dividends per share 7.65p for the period, an increase of 9%, 12% and 20% respectively.
Legal & General provides annuities to over 700,000 current pensioners and over 150,000 deferred pensioners, has been an active participant in the BPA market for 25 years and won buyout firm of the year at the 2012 European Pensions Awards. They have expertise in investment management, all aspects of defined benefit provision as a well as an in-depth understanding of mortality trends and longevity risk.
1 As at 25 June 2013.
2 Proforma AUA at 31 March 2013
For more information on Legal & General, please see http://www.legalandgeneralgroup.com/
4. Lucida plc
Lucida is an insurance company focused on the annuity and longevity risk business, including the defined benefit pension buyout market and the market for bulk annuities. Lucida is closed to new business.
Forward looking statements
Nothing in this announcement should be construed as a profit forecast. In particular, statements that the transaction will be earnings accretive are not, and do not constitute, a profit forecast and should not be interpreted to mean that Legal & General's or Lucida's earnings following the transaction will necessarily match, or be greater than, the historical published earnings of Legal & General or Lucida.
This document may contain certain forward-looking statements relating to Legal & General Group, its plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve uncertainty because they relate to future events and circumstances which are beyond Legal & General's control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory and Governmental authorities, the impact of competition, the timing impact of these events and other uncertainties of future acquisition or combinations within relevant industries. As a result, Legal & General Group's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in these forward-looking statements and persons reading this announcement should not place reliance on forward-looking statements. These forward-looking statements are made only as at the date on which such statements are made and Legal & General Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.
