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Legal & General’s new chief executive Antonio Simoes is to overhaul its investment division and target UK and US workplace pensions in a bid to boost its returns.
Mr Simoes, who replaced long-servicing chief executive Nigel Wilson at the start of the year, will also sell off L&G’s house-building division Cala and return more money to shareholders through a combination of dividends and buying back its shares as part of his strategic revamp.
The insurer will merge its investment funds business L&G Investment Management with its private equity arm, and expand the combined group activities in the property, business loans and infrastructure sectors to boost its returns.
At the same time, it wants to take a much larger slice of the defined benefit pension scheme risk transfer market.
Risk transfers are when companies pay insurers like L&G to take their DB pension schemes off their hands.
Last year, L&G wrote £13.7billion globally of risk transfer business. However, Simoes wants it to do up to £65billion in the UK alone within four years. He is looking in particular to the UK, US, Canadian and Dutch markets to grow that business.
Simoes also said that L&G will invest in its personal pensions and savings business, as well as use artificial intelligence and technology to improve the efficiency of its protection unit, which includes illness and life cover.
He added that L&G will hike its dividend five percent this year and then two percent a year until 2027 and spend around £200million annually on share buybacks to reward investors.
Mr Simoes said: “We will evolve our business to better address society’s changing investment needs.
“The strategy and targets set out today signal L&G’s ambition and commitment to invest to grow our business and reward shareholders for their support.”
However, Mr Simoes’s strategy update was met with disappointment by the market. The shares fell in response as investors sold out and AJ Bell investment director Russ Mould said there was scepticism that L&G would be able to hit its growth targets, as well as disappointment about its shareholder payouts.
Mr Mould said: “A key driver for growth is expected to be aggressive expansion into the market for corporate pensions deals.
“Aiming to complete £65billion worth just in the UK by the end of 2028 seems a stretch.”
