The new boss of Legal & General has announced a major 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 company would double down on the rapidly growing market for corporate pension deals, in which companies hand their schemes to insurers to manage.
L&G, the UK’s biggest provider of defined contribution pension schemes, is aiming to complete between £50bn and £65bn of deals by the end of 2028, up from a previous target of £40bn to £50bn.
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 that 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 a single, global asset management business, rolling its alternative asset manager Legal & General Capital into its traditional asset manager, Legal & General Investment Management and creating a new private markets division.
It is looking to sell off “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”.
The announcement did not feature the “inclusive capitalism” phrase used frequently by his predecessor, Nigel Wilson. Simões insisted that purpose remained an important part of the strategy. “Institutional retirement, asset management and retail, they’re very much focused on solving societal issues, and I’ve talked about that deep sense of purpose that’s right at the core of L&G.”
Despite the sweeping changes, Simões said there would be no redundancies but he would hope to make “efficiencies” across the business, including using fewer cloud providers. “It’s clearly not about people, it is about us working more effectively together, about growth,” he added.
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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 also announced 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 3% in early trading.