Legal & General announces $250 million share buyback, investment unit merger

British life insurer Legal & General has unveiled plans for a £200 million ($254.9 million) share buyback and the merger of its investment units, Legal & General Investment Management (LGIM) and Legal & General Capital, in a move aimed at enhancing returns and focusing on less capital-intensive business.

The merger will lead to the departure of LGIM CEO Michelle Scrimgeour. The strategy includes a 5 per cent dividend per share growth for 2024 and 2 per cent annual growth through 2027, coupled with further buybacks. CEO Antonio Simoes envisions a streamlined, growth-oriented L&G, stressing fee-based earnings and higher returns on capital.

L&G, a key player in the bulk annuity market, reported flat operating profits for 2023 due to challenging market conditions. It aims to write £50 billion-£65 billion in UK bulk annuities by 2028, leveraging this to fuel asset management growth. The company also targets 6-9 per cent annual growth in core operating earnings per share to 2027, with a return on equity above 20 per cent.

The insurer plans to expand its international business, especially in the US, and grow private market assets under management to £85 billion by 2028, up from £48 billion last year. Housebuilder CALA will be managed separately, potentially ahead of a divestment.

Despite these plans, KBW said L&G's targets were "slightly underwhelming," and they have maintained their "underperform" rating.

(With Reuters inputs.)