Legal & General, the £13.69billion FTSE 100 company, which takes care of £1trillion worth of retirement and other savings, is being revamped under chief executive Antonio Simoes.
He is promising investors a ‘simpler, better-connected L&G’, in pursuit of which the complex group is being restructured.
Plans include the sale of CALA, the housebuilding arm acquired in 2018 in a diversification.
Curious that L&G is selling CALA now?
The Government wants to build 1.5m homes in this parliament.
But there will be no immediate benefit from this policy and Portuguese-born Simoes wants to simplify L&G which he regards as a route to boosting returns to shareholders. Persimmon is seen as the most likely buyer for CALA – at a price of about £1billon.
Other changes?
Simoes wants to boost the corporate pension division by winning ‘bulk annuity’ deals. Firms are keener to ‘de-risk’ – dispense with the onerous responsibilities for their company pensions.
They are willing to pay a sum to a major insurer, such as L&G or Aviva, to take on full responsibility for the scheme.
Is L&G already a big player in annuities?
It IS a power player. In 2023, L&G did £12bn-worth of bulk annuity business, which included a £4.8billion buy-in from Boots and a £2.7billion buy-in from British Steel, the fourth from this company.
Actuaries estimate that about £50billion in pension liabilities were offloaded in 2023 – and this year’s total could be £80billion.
Any other moves?
Another Government policy should enable L&G to make the most of an areas in which it specialises – investing in ‘private’ assets, that is, companies not listed on the stock markets.
As part of her pensions ‘Big Bang’, the Chancellor Rachel Reeves wants pension funds to channel more money into such companies, particularly those in energy, roadbuilding and other areas of infrastructure.
When L&G was founded in 1836 infrastructure was the focus. The Stockton & Darlington, the world’s first public railway, was one of its first ventures.
Exciting but why is share price down this year?
Shares have fallen 9 per cent since January largely in response to news that dividends will not increase as rapidly as hoped.
Simoes may argue that a £200m share buyback is more than adequate compensation for reduced payouts. (Share buybacks reduce the number of shares in issue which should give a fillip to the price of the remaining shares.)
Some shareholders remain unconvinced, however.
Where are shares headed?
Despite the dividend disappointment, analysts rate the shares as either a ‘hold’ or a ‘buy’ with an average price of 266p, against 229.5p yesterday.
DIY INVESTING PLATFORMS
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.