Legal & General Group plc
6 December 2017
This announcement contains inside information.
Legal & General to sell its closed Mature Savings business to Swiss Re
Legal & General Group Plc ("Legal & General") announces that it has today reached agreement to sell its Mature Savings business to the ReAssure division of Swiss Re Ltd ("Swiss Re") for £650m.
Swiss Re's ReAssure division is a life and pensions business designed to manage closed and non-core in-force portfolios, focusing on delivering excellent service and outcomes to policyholders. By transferring the Mature Savings business to Swiss Re we are confident that this will deliver positive results for the existing Legal & General customers who will benefit from this focus and economies of scale in the specialisms required.
The business being sold comprises principally retail customers who hold traditional insurance based pensions, savings and investment products. Its assets at H1 2017 of £33bn include both unit-linked business and Legal & General's £21.4bn with-profits fund. With around 1 million customers, it has largely been closed to new business.
Legal & General's continued growth in these product areas will be through Legal & General Investment Management's ("LGIM's") workplace pension business which now has approximately 2.5 million customers, through its intermediated retail savings business and through its personal investing unit which offers ISAs and Unit Trusts directly to customers.
Following this disposal Legal & General will accelerate its growth agenda in the following areas:
· Investing & Annuities through Legal & General Retirement and Legal & General Capital;
· Investment Management through LGIM; and
· Insurance through Legal & General Insurance and General Insurance
The £650m proceeds, to be satisfied in cash, will be received by Legal & General at the start of January 2018 and all profits and transfers for the 2017 financial year will be retained by Legal & General. Swiss Re will assume the economic exposure of the business from 1 January 2018 via a reinsurance structure. It is expected that the formal transfer of the business will be completed in mid-2019, subject to satisfaction of normal conditions for a transaction of this type including court sanction. The transfer will be effected by way of a Part VII transfer under the Financial Services Markets Act 2000. Swiss Re has agreed an investment management agreement with LGIM to continue to manage the funds transferred.
The transaction is expected to generate a small increase in the group Solvency II coverage ratio at outset, increasing to approximately 2% on completion of the Part VII transfer. The sale of the business is expected to generate a one-off IFRS gain on completion of the Part VII transfer, anticipated in 2019, of c.£450m. The adjusted Solvency II Own Funds for this business is £659m1. During 2016 the Mature Savings business generated £105m operating profit. The net proceeds of the transaction will be reinvested in the attractive growth opportunities of Legal & General's core businesses.
Nigel Wilson, Chief Executive Officer of Legal & General Group, commented:
"This was a difficult decision as with-profits savings has been a part of Legal & General's UK business for over 50 years. However we have in Swiss Re a great partner, who will be an excellent steward of the business and its many customers and policyholders. Selling Mature Savings is the right decision for us - another important, measured, step in growing our company and updating our products. It will drive further earnings growth by allowing us to focus on our successful market-leading businesses and to accelerate the scaling up of our growth businesses.
Under-saving, including for retirement, is an economic and social challenge for the UK, and Legal & General remains committed to providing attractive solutions to help our customers achieve their financial goals based around LGIM's modern workplace savings, personal investment and intermediated product range."
1. Shareholder interest in Solvency II Own Funds as of H1 2017 adjusted for amounts to be retained by L&G in respect of the 2017 financial year.
ends
For further information, please contact:
Investors:
Laura Doyle Head of Investor Relations 020 3124 2088
Sujee Rajah Investor Relations Manager 020 3124 2047
Media:
John Godfrey Corporate Affairs Director 020 3124 2090
Graeme Wilson Tulchan Communications 020 7353 4200
Notes to editors:
Legal & General Group Plc:
1. 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 £15.7bn (as at 5 December 2017) and is responsible for investing £951bn worldwide (as at 30 June 2017) on behalf of investors, policyholders and shareholders.
2. Legal & General has over seven million customers in the UK for life assurance, pensions, investments and general insurance plans and over one million customers in the US who rely on us for life assurance.
3. For full year 2016, Legal & General's adjusted operating profit (IFRS basis) was £1,628m and adjusted earnings per share were 22.20p for the period, an increase of 11% and 19% respectively. Net release from operations (net cash) was up 12% to £1,411m. Full year dividend was up 7% to 14.35p, with adjusted return on equity at 19.6%.
4. In H1 2017, Legal & General's operating profit was up 27% to £988m with earnings per share up 41% to 15.94p. Total release from operations was up 13% to £824m. An interim dividend of 4.30p was announced, return on equity rose to 26.7% and the Solvency II coverage ratio was 186%.
5. Legal & General is listed on the London Stock Exchange with the ticker symbol LGEN.LN and has an American Depositary Receipt ticker symbol OTC:LGGNY. Further information on our ADR program can be found here: http://www.legalandgeneralgroup.com/investors/adr.html
For more information on Legal & General, please see http://www.legalandgeneralgroup.com/
Forward-looking statements
This announcement may contain certain forward-looking statements relating to Legal & General, 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'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 announcement or any other forward-looking statement it may make.
