L&G is generally considered Britain’s number one life insurer. This is down to it’s numbers, these are last year’s Bulk Purchase Annuities league table
It worries the FT that the life company with the largest insured master trust, the insurance company with the biggest share of the buy-in market is seen by the FT as a target for American Private Equity Houses
To get its Bulk Purchase Annuity crown it had to do a deal with American Private Equity firm
The upstart private capital players have now saturated US demand for annuity products, however, and are instead hunting growth in L&G’s core market: pension risk transfers. Antonio Simoes, the man who took over from Nigel Wilson has run into the arms of those who might buy him. He signed a $20bn deal with New York’s Blackstone for access to US private credit. A former L&G executive told the FT this was “bizarre”, since it was an open acknowledgment that L&G could not compete in a crucial market.
My love of L&G has been based on Mark Wilson’s pioneering of what several years later became the Mansion House Accord
As one of the UK’s most outspoken critics of domestic under-investment, Wilson threw L&G’s balance sheet behind early-stage companies, massive housing projects and science parks, arguing for planning reform and financial rule changes that he believed would help pensioners benefit from British growth.
But L&G since his departure has lost its nerve.
Wilson’s high-conviction style delivered some large losses, such as a £279mn writedown in a bet on modular homes that ran up against planning delays. Simões, since taking over, has sold housebuilder Cala and a US business, and collapsed Legal & General Capital into the main asset manager.
The main asset manager, LGIM is huge, but it’s margins are tiny. They’ve been improved by creating some private market action but not by much. Simões points to an improvement from 0.07 percentage points in 2024 to 0.09 percentage points in the first quarter of this year.
Perhaps its most valuable market it has grown itself is the DC pension schemes it insures with passive funds.
It manages more than £200bn in defined-contribution pension assets. Simões says this market sets L&G apart from alternative asset managers, which have focused on the more capital-intensive defined benefit schemes. We await to see how it will compete if DC turns to CDC over the next ten years. DC pension margins are a lot higher than what it can get from the highly competitive passive funding where institutional prices can be negative, the only money being made being from stock-lending.
And much of the asset management business remains concentrated in low-margin passive strategies;
Analysts and former executives increasingly question whether it has the scale to compete. Rival European insurers such as Axa and NN Partners have called it quits.
As for the private market action, this is now attracting some unwanted attention of the Prudential Regulatory Authority. L&G’s higher exposure to risky types of US private credit, when compared with its European insurance peers, has drawn analysts’ attention at a time when concerns have been mounting about the quality of loans in a relatively new market.
To use a phrase that isn’t heard much in insurance, L&G’s story has been over the past two years a “shitshow”.
