Legal & General's new chief promises 'simpler investment case'

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Legal & General’s new chief executive António Simões promised a strategic overhaul that would create a “simpler investment case” for the FTSE 100 insurer, asset manager and housebuilder, as he presented his first set of results since taking the job in January.

Announcing the group’s 2023 results on Wednesday, Simões said the business had “demonstrated resilience in challenging markets to achieve record new business volumes” in corporate pension deals, UK annuities and US protection products. L&G posted an operating profit of £1.7bn, broadly flat on the previous year but below analysts’ consensus estimates.

A wave of corporate pension deals, in which the insurer takes over the assets and liabilities of company schemes, lifted the retirement division, while the retail business dimmed slightly because of a lower contribution from fintech investments amid a tougher market.

L&G’s balance sheet investment unit was flat after a tougher second half for the property market, and its asset manager, Legal & General Investment Management, posted an expected fall in profit as higher interest rates weighed on asset values and, therefore, fees.

The company’s shares were down more than 2 per cent in morning trading in London.

“This is the right moment to take a fresh perspective, build on our track record and set out a vision for profitable and sustainable growth,” said Simões, who will lay out his strategy for the group in June.

On a media call, Simões stressed that would include “a clear strategy and a simpler investment case”. The group was carrying out a “thorough” review of all its business units, he said, which include a wholly owned housebuilder, Cala Homes, alongside Britain’s biggest asset manager and its traditional retail and workplace insurance products such as pensions.

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Asked on the media call whether the company was actively considering a sale of Cala, Simões said it was a “very strong franchise” but declined to comment on which businesses were “more or less strategic”, adding: “I am looking at everything.”

The “big question” investors were asking, he added, was where long-term growth was going to come from, beyond the current wave of corporate pension deals, be it in retail or asset management.

The company’s Solvency II coverage ratio, the amount of regulatory capital it holds as a percentage of the minimum required, sat at 224 per cent at the end of the year, above consensus estimates of 217 per cent, while the dividend was in line with expectations.

The company said it had “considerable opportunities available to deliver attractive returns to shareholders by retaining and investing capital within the group” but added it would consider these against the merits of returning capital to shareholders.

Simões, who joined the business from Santander, replaced Sir Nigel Wilson, L&G’s chief of more than a decade. L&G’s push deeper into building everything from homes, science parks and other infrastructure was central to Wilson’s vision of “inclusive capitalism”.

Analysts at RBC Capital Markets described the results as “mixed”, while Barclays said the “promising outlook suggests growth in bulk annuity volumes at sustainable margins”.