L&G sharpens focus on pension risk transfers
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Legal & General is looking to grow buy-in and buyout volumes by writing £50bn to £65bn in the UK by year-end 2028. The financial services behemoth is also merging its two asset management arms and will start the search for a chief executive for the combined unit, while LGIM CEO Michelle Scrimgeour is stepping down.
L&G told investors on Wednesday that it considers itself well placed to seize the institutional retirement opportunity, both in the UK and internationally.
“The addressable market is significant – only 10% of the c.£6.6tn of defined benefit pension assets in the UK, the US, Canada and the Netherlands have so far transferred to insurers,” the firm said.
L&G said buy-ins and buyouts are expected to average £45bn a year over the next decade, up from about £25bn a year since 2018. In the UK, the insurer had about a quarter of the market last year as it wrote £12bn, according to LCP, including a £4.7bn buy-in with pharmacy chain Boots.
It intends to have a compound annual growth rate of 5-7% over 2023-2028 in its institutional retirement operating profits and write £50bn to £65bn of UK risk transfers at a capital strain of less than 4% over 2024-2028.
L&G group CEO António Simões said: “Over the last five months we have rigorously reviewed our business, listening to investors, customers, partners and employees. This work has deepened my belief in our strong foundations and excellent potential.”
He said the firm would focus on three core business divisions: institutional retirement; asset management; and retail.
“By seizing the opportunity in institutional retirement while investing to scale and [deepening] our capabilities in asset management and retail, we will evolve our business to better address society’s changing investment needs, and shift towards fee-based earnings at higher returns on capital,” Simões said.
The company is merging Legal & General Investment Management with Legal & General Capital, its alternative assets arm as it looks to not only drive growth in public markets but to “materially scale” its in-house and origination platform capability in private markets.
The new combined manager will have an expanded offering across real estate, private credit and infrastructure, with L&G pointing to “an accelerated programme of fund launches”.
A search has started for a CEO of the combined asset manager, while Michelle Scrimgeour has announced her intention to step down from the role of LGIM CEO. She will continue as CEO of LGIM (Holdings) Ltd until the new appointment is made and lead the transition and establishment of the new division with LGC chief executive Laura Mason, who has been appointed CEO of private markets.
