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Legal & General plans $250 million share buyback, merges investment units

Wed, 12th Jun 2024 08:22

LONDON, June 12 (Reuters) - British life insurer Legal & General is planning a 200 million pound ($254.9 million) share buyback and a merger of its investment units, it said on Wednesday, as it looks to boost returns by moving towards less capital-intensive business.

L&G will combine Legal & General Investment Management, one of the biggest investors in the UK stock market, and its alternative asset platform Legal & General Capital, it said in a trading statement ahead of a capital markets day outlining its new strategy.

LGIM CEO Michelle Scrimgeour will step down following the changes, L&G said.

The buyback is part of a new strategy targeting 5% growth in dividend per share for the full year 2024, followed by 2% annual dividend per share growth to 2027, along with further "similar" buybacks, the insurer said.

"Our vision is for a growing, simpler, better-connected L&G, focused on three core business divisions," new CEO Antonio Simoes said in the statement, adding that the changes marked a "shift towards fee-based earnings at higher returns on capital".

L&G is a major player in the bulk annuity market - insuring defined benefit, or final salary pension schemes. The business requires high levels of regulatory capital, which can impact investor returns.

The company posted flat operating profit for 2023, citing tough market conditions.

It said it aimed to write 50 billion-65 billion pounds in UK bulk annuities by year-end 2028, to generate cash to drive asset management growth. The growing UK bulk annuity market currently totals around 50 billion pounds annually.

L&G said it was targeting an annual compound growth rate of 6-9% in core operating earnings per share to 2027, at a return on equity above 20%.

Simoes also said the insurer planned more focus on its international business, particularly in the United States.

The bulk annuity business is a much smaller part of strategies deployed by rivals Aviva and M&G.

L&G plans to grow its assets under management in private markets to 85 billion pounds by 2028, compared with 48 billion last year.

It said housebuilder CALA would be managed separately from the asset management unit ahead of potential divestment.

KBW analysts said L&G's targets were "slightly underwhelming", reiterating their "underperform" rating. ($1 = 0.7847 pounds) (Reporting by Carolyn Cohn; Editing by Sinead Cruise and Jan Harvey)

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