Legal & General to sell its closed Mature Savings business to Swiss Re for £650m

Swiss Re’s ReAssure division is a life and pensions business designed to manage closed and non-core in-force portfolios, focusing on delivering excellent service and outcomes to policyholders. By transferring the Mature Savings business to Swiss Re we are confident that this will deliver positive results for the existing Legal & General customers who will benefit from this focus and economies of scale in the specialisms required.

The business being sold comprises principally retail customers who hold traditional insurance based pensions, savings and investment products. Its assets at H1 2017 of £33bn include both unit-linked business and Legal & General’s £21.4bn with-profits fund. With around 1 million customers, it has largely been closed to new business.

Legal & General’s continued growth in these product areas will be through Legal & General Investment Management’s ("LGIM’s") workplace pension business which now has approximately 2.5 million customers, through its intermediated retail savings business and through its personal investing unit which offers ISAs and Unit Trusts directly to customers.

Following this disposal Legal & General will accelerate its growth agenda in the following areas:

• Investing & Annuities through Legal & General Retirement and Legal & General Capital;
• Investment Management through LGIM; and
• Insurance through Legal & General Insurance and General Insurance

The £650m proceeds, to be satisfied in cash, will be received by Legal & General at the start of January 2018 and all profits and transfers for the 2017 financial year will be retained by Legal & General. Swiss Re will assume the economic exposure of the business from 1 January 2018 via a reinsurance structure. It is expected that the formal transfer of the business will be completed in mid-2019, subject to satisfaction of normal conditions for a transaction of this type including court sanction. The transfer will be effected by way of a Part VII transfer under the Financial Services Markets Act 2000. Swiss Re has agreed an investment management agreement with LGIM to continue to manage the funds transferred.

The transaction is expected to generate a small increase in the group Solvency II coverage ratio at outset, increasing to approximately 2% on completion of the Part VII transfer. The sale of the business is expected to generate a one-off IFRS gain on completion of the Part VII transfer, anticipated in 2019, of c.£450m. The adjusted Solvency II Own Funds for this business is £659m*. During 2016 the Mature Savings business generated £105m operating profit. The net proceeds of the transaction will be reinvested in the attractive growth opportunities of Legal & General’s core businesses.

Nigel Wilson, Chief Executive Officer of Legal & General Group, commented:

"This was a difficult decision as with-profits savings has been a part of Legal & General’s UK business for over 50 years. However we have in Swiss Re a great partner, who will be an excellent steward of the business and its many customers and policyholders. Selling Mature Savings is the right decision for us – another important, measured, step in growing our company and updating our products. It will drive further earnings growth by allowing us to focus on our successful market-leading businesses and to accelerate the scaling up of our growth businesses.

Under-saving, including for retirement, is an economic and social challenge for the UK, and Legal & General remains committed to providing attractive solutions to help our customers achieve their financial goals based around LGIM’s modern workplace savings, personal investment and intermediated product range."

*Shareholder interest in Solvency II Own Funds as of H1 2017 adjusted for amounts to be retained by L&G in respect of the 2017 financial year.