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Legal & General (LGEN) has reached a deal to sell part of its pensions business to Swiss Re for £650 million.
The deal is for L&G’s mature savings division, comprising of traditional insurance-based pensions and investment products such as its £21.4 billion with-profits fund which is closed to new business. The total assets of the division being sold are £33 billion.
The business is being acquired by the ReAssure division of reinsurer Swiss Re, although Legal & general will continue to manage the funds. Shares in Legal & General fell 1.1% to 261p on the news.
Legal & General chief executive Nigel Wilson said the deal would allow the group to expand in areas it wants to focus on.
‘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,’ he said.
‘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.’
Shore Capital analyst Eamonn Flanagan said the move was 'smart, opportunistic and entirely consistent with the group's strategy'.
'This disposal is consistent with the group's emphasis on rationalising its operations, modernising its products and focusing on its key markets,' he said.
'The earnings from the mature savings books are in decline with Legal & General anticipating earnings growth from reinvesting said proceeds into its other lines of business.'
Numis analyst Marcus Barnard also welcomed the move. 'This business represented 5% of group operating profit and we thought was looking increasingly marginal in the group context,' he said.
'We expect the majority of the proceeds will be deployed to buy back books of annuities in the UK. Given the large amount potentially for sale, this is probably a buyer's market and this move makes sense for shareholders.'
The business is expected to finish transferring to Swiss Re by mid-2019.