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Legal & General to sell mature savings arm to Swiss Re for £650M

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Legal & General to sell mature savings arm to Swiss Re for £650M

Legal & General Group Plc agreed to sell its mature savings division to Swiss Re AG unit ReAssure for £650 million.

Legal & General will receive the proceeds in cash at the start of January 2018, with all profits and transfers for the 2017 financial year to be retained by the U.K. insurance company. Swiss Re will assume the economic exposure of the business from Jan. 1, 2018, onward, through a reinsurance structure.

The formal transfer of the business is expected to complete in mid-2019, subject to regulatory approval and normal conditions, including court sanction. Swiss Re reached an investment management agreement with Legal & General Investment Management to continue to managed the transferred funds.

Legal & General's mature savings arm had assets of £33 billion in the first half of 2017 and has about 1 million clients, primarily retail customers who hold traditional insurance based pensions, savings and investment products. The adjusted Solvency II Own Funds for the business is £659 million, and the division generated £105 million in operating profit during 2016.

Legal & General noted that the transaction is expected to generate an increase of about 2% in the group's Solvency II coverage ratio and a one-off IFRS gain of approximately £450 million in 2019. The insurer will reinvest the net proceeds from the sale for growth opportunities in its core businesses.

Meanwhile, Swiss Re said its ReAssure division will administer an additional 1.1 million policies, bringing the total number of owned or administered policies to about 4.7 million. The deal will also increase ReAssure's AUM, including investments for unit-linked and with-profit business, by £33 billion to about £77 billion.

ReAssure is a life and pensions business within Swiss Re Life Capital, designed to managed closed and noncore in-force portfolios.