Legal & General’s new boss has announced a shake-up of the company, including a sharper focus on its booming pensions division and putting its housebuilding business up for sale.
The insurance and asset management group’s new CEO, António Simões, a banker who started in January and previously worked for Santander and HSBC, promised a “simpler and better connected” company focused on three divisions.
In his first major strategy announcement, Simões said the £14bn FTSE 100 company would double its profits in the fast-growing market for corporate pension contracts, in which companies pay insurers to take on their pension liabilities.
L&G, Britain’s largest defined contribution pension scheme provider, aims to complete between £50 billion and £65 billion of deals in Britain by the end of 2028, up from a previous target of £40 billion to £ 50 billion. Last year, £13.7 billion was agreed globally, including £12 billion in Britain.
Simões said this represents a significant opportunity as only 10% of the £6.6 trillion of defined benefit pension assets in Britain, the US, Canada and the Netherlands have been transferred to insurers to date.
He said the transfers represented a “mark-up of future profits”. “We need this reliable revenue for years afterward – we’re talking decades,” he added.
As part of the shake-up, L&G will create a single global asset management business, bringing Legal & General Capital, which invests in infrastructure and construction projects, into its traditional asset manager, Legal & General Investment Management (LGIM), including a new private company. markets divided.
Michelle Scrimgeour will step down from her role as CEO of LGIM. The company is looking globally for a CEO to lead the new larger division.
The company aims to sell ‘non-strategic’ assets, the largest of which is housebuilder Cala Homes, along with brownfield land and real estate such as a shopping center in Bracknell, Berkshire. However, it will continue to invest in affordable housing, which Simões described as an “important strategic undertaking”.
Strikingly, the announcement did not include the phrase “inclusive capitalism” often used by his predecessor, Nigel Wilson, who invested in “socially useful” assets such as science parks, student housing and retirement housing. Simões emphasized that a “deep sense of purpose” remained central to the strategy.
Despite the sweeping changes, which were seen as positive by analysts, Simões said there would be no layoffs but that he planned to make “efficiencies” across the company, including using fewer cloud providers. “This is a growth plan and we are investing to grow the business, so this is not about layoffs,” he said.
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The company said the changes were aimed at making the business sustainable in the long term, even if pension transfers dry up.
L&G said it would return more to shareholders than planned in coming years, with an initial share buyback of £200 million this year, along with a 5% increase in its dividend. This will be followed by dividend growth of 2% per year until 2027 and further share buybacks.
The company’s stock price fell more than 5% on Wednesday.