Legal & General Group Sells Its General Insurance Business To Allianz Holdings

  • Jun 03, 2019 BST
  • Team Kalkine
Legal & General Group Sells Its General Insurance Business To Allianz Holdings

Legal & General Group PLC (LGEN) is a London, United Kingdom-headquartered provider of individual life assurance products and investment management services. In the UK and US, the company leads the market in managing retirement risk for pension schemes and is the UK's largest provider of individual life assurance products.  It is among the top asset management group with GBP 1.015 trillion worth of assets under management (AUM). The company's operations are differentiated in five operating segments: General Insurance, Legal & General Retirement, Legal & General Investment Management, Legal & General Capital and Legal & General Insurance. Nigel Wilson is the Group Chief Executive.

Following the revelation last month that Legal & General was in exclusive talks with Allianz Holdings, on 31st May 2019, the company announced that it had agreed to sell its General Insurance business to the German financial services company for a base price of £242 million. After securing customary regulatory approvals, the proposed deal is likely to be completed in the second half of 2019. Besides the base price, which is commensurate with IFRS book value and will be paid at the completion of the agreement, financial consideration includes potential further unspecified payments over a three-year period from ongoing commercial arrangements.

Following the completion of the transaction, the company's Solvency II ratio is anticipated to rise by around 2 per cent. In a press release, the company said that the proceeds from the deal would be reinvested in the company's attractive and growing core businesses. The Birmingham-based unit, which provides home, travel and pet insurance to UK customers, had been on sale for several months. In 2018, the division's gross written premiums were £410 million, representing an increase of 11% over the prior year. The operating profit during the same period dropped from £37 million to zero. It has developed a number of digital or insurtech solutions and distributes its products through direct sales and a variety of commercial partners. In recent years, Legal & General had sold its international insurance businesses in the Netherlands, France and India, as well as its savings businesses, and had sought to offload noncore elements of its portfolio.

Allianz Holdings, a German insurer, in addition to the general insurance business of Legal & General, bought the 51 per cent of LV General Insurance currently not owned by it. The company said that with 4 billion of revenue and a 9 per cent market share, the deals would make it the second biggest general insurer in the UK, as the L&G business will be integrated with LV General Insurance.

Share Price Commentary

Daily Chart as at June-03-19, before the market closed (Source: Thomson Reuters) 

On 3rd June 2019, at the time of writing (before the market closed, GMT 2:30 pm), LGEN shares were trading at GBX 254.60, down by 0.77 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 292.30/GBX 221.80. On the valuation front, the stock was trading at a trailing twelve months PE multiple of 8.2x as compared to the industry median of 12.3x. The company’s stock beta was 0.95, reflecting roughly the same volatility as compared to the benchmark index. Total outstanding market capitalisation was £15.27 billion with a dividend yield of 6.40 per cent.

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