You have to be as big and fearless as the Financial Times or as small but fearless as this blog, to publicise what people in the City are talking about, the breaking up or even the wholesale sell of L&G to someone else. Last week Emma Dunkley pointed out Legal and General as vulnerable to an offer from an American insurer and finance house. Here Emma repeats the rumours in the FT’s Monday email.
It seems impossible for any UK insurer to carry out the task of dismantling our DB pension system without the help of America and its benign regulation of bulk purchase annuities.
It’s been a difficult couple of years for London-based Legal & General, the FTSE 100 insurer and asset manager.
L&G’s share price has been flat as new entrants and tight credit spreads have squeezed profits in its core market — sparking speculation over whether L&G could be sold or broken up, write Lee Harris and Emma Dunkley.
Analysts now question whether L&G’s dividend is sustainable and whether it can survive as a public company. City advisers told the FT that potential bidders, including insurers and alternative asset managers, had been running the rule over the business.
“It’s getting pretty real,” one US private capital executive said about groups drawing up plans to bid for L&G. “People are spending real money on this now.”
“It feels like we’re being dressed up for a sale,” said one current L&G insider. Core businesses, such as index funds in the asset management arm, were “keeping the lights on”. “But they know they’ve got a structural problem and they are trying to throw everything at it.”
Private capital executives told the FT that there were a host of strategic alternatives open to L&G — if it chose to pursue them — from selling off blocks of its sprawling insurance portfolio to offloading assets to reinsurers. It could also find a private capital partner to assume some of its pension risk transfer assets.
Potential bidders have also considered a full takeover of L&G, four people familiar with those discussions said, though any such transaction would be challenging and politically sensitive due to the size of L&G and its large holdings of gilts.
Still, chief executive António Simões told the FT he was not considering a break-up or sale. “There’s no discussions or anything else going on,” he said. When asked if L&G had been approached, he added: “I am 100 per cent focused on executing my strategy.”