Investing.com -- Shares of Legal & General (LON:LGEN) surged 7.5% following the company’s announcement of the sale of its US protection business to Japanese life insurer Meiji Yasuda, alongside the formation of a strategic partnership in US pension risk transfer (PRT).
The deal, valued at $2.3 billion (£1.8 billion), has prompted LGEN to forecast an additional £1 billion share buyback upon completion by the end of 2025.
The transaction is expected to be core earnings per share (EPS) accretive by approximately 1-2%, with the US protection business anticipated to generate operating profits of $90 million (around £72 million) in 2024.
Despite this, LGEN anticipates a roughly 20% reduction in ongoing Solvency II (SII) net surplus generation. Nevertheless, the company reaffirmed its financial targets, including a Solvency II ratio improvement of 22% post-completion and 7% after the proposed share buyback.
LGEN also revealed that Meiji Yasuda would acquire a 5% stake in the company. A virtual investor presentation held today at 9 am detailed further implications of the deal, including a projected distribution of 40% of LGEN’s market capitalization through dividends and share buybacks between 2025 and 2027.
Analysts at RBC commented on the deal’s unexpected nature, stating, "The transaction comes as a surprise as US protection and US PRT were not included in the ’corporate investments unit’ that LGEN set out at the CME last June. However, we did note that the protection businesses were assessed by LGEN as having less of a strategic fit than other parts of the group."
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