The new boss of Legal & General has announced a shake-up of the company, including a sharper focus on its booming pensions arm and putting its housebuilding business up for sale.
The insurance and asset management group’s new chief executive, António Simões, a banker who started in January and previously worked for Santander and HSBC, promised a “simpler and better-connected” business, focused on three divisions.
In his first big strategy announcement, Simões said the £14bn FTSE 100 company would double down on the rapidly growing market for corporate pension deals, in which companies pay insurers to take on their retirement liabilities.
L&G, the UK’s biggest provider of defined contribution pension schemes, is aiming to complete between £50bn and £65bn of deals in the UK by the end of 2028, up from a previous target of £40bn to £50bn. Last year, it agreed £13.7bn globally, including £12bn in the UK.
Simões said it represented a significant opportunity, as only 10% of the £6.6tn of defined benefit pension assets in the UK, the US, Canada and the Netherlands have so far transferred to insurers.
He said the transfers represented a “store of future profit”. “We need these reliable earnings after that for years to come – we’re talking about decades,” he added.
As part of the shake-up, L&G will create one global asset management business, rolling Legal & General Capital, which invests in infrastructure and building projects, into its traditional asset manager, Legal & General Investment Management (LGIM), including a new private markets division.
Michelle Scrimgeour will step down from her role as chief executive of LGIM. The company is looking globally for a chief executive to lead the new bigger division.
The company is aiming to sell “non-strategic” assets, the biggest of which is the housebuilder Cala Homes, along with legacy land and real estate, such as a shopping centre in Bracknell, Berkshire. However, it will continue to invest in affordable homes, which Simões described as a “key strategic business”.
Notably, the announcement did not feature the “inclusive capitalism” phrase used frequently by his predecessor, Nigel Wilson, who invested in “socially useful” assets such as science parks, student accommodation and retirement housing. Simões insisted that a “deep sense of purpose” remained central to the strategy.
Despite the sweeping changes, which analysts viewed as positive, Simões said there would be no redundancies but that he planned to make “efficiencies” across the business, including using fewer cloud providers. “This is a growth plan, and we’re investing to grow the business, so this is not about redundancies,” he said.
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The company said the changes were intended to make the business sustainable in the long run, even when the pensions transfers dry up.
L&G said it would return more to shareholders in the coming years than planned, with a first share buyback of £200m this year, along with a 5% rise in the dividend. This will be followed by 2% dividend growth a year until 2027 and further share buybacks.
The company’s share price fell more than 5% on Wednesday.
