FTSE 100-listed life insurer Legal & General Group PLC (LSE:LGEN)’s upcoming interims on Wednesday, 7 August, will hopefully provide some insights into the group’s rumoured sale of its housebuilding subsidiary Cala Group.
Reports of a potential Cala sale first emerged in March via a Sky News report suggesting L&G could fetch £1 billion from the disposal.
Housebuilder Persimmon PLC (LSE:PSN) emerged as a potential suitor in May, though nothing has been confirmed.
“We expect focus into results to be on the potential sale of L&G's build-to-sell housebuilder Cala, where we expect a potential sale as a positive catalyst,” said analysts at UBS.
Cala, which develops houses across the south of England, the Midlands and Scotland, generated revenues of £1.32 billion and £258 million in gross profit in 2022, per the latest accounts filed with Companies House.
As for L&G’s core financials, operating earnings are expected to remain flat against the 2023 interims, said UBS.
UBS is 3% ahead of the City’s organic sales growth estimates “as we expect £350m p.a. of
management actions, with £175m delivered over 1H24”.
The bank recently upgraded L&G to a buy on “an attractive valuation” of an 11% all-in yield “and upside to management action delivery over the plan period”.
L&G is also facing scrutiny from the Prudential Regulatory Authority over its use of funded reinsurance deals.
The PRA is concerned that the current growth in these transactions by UK life insurers could cause a build-up of risk in the sector which could ultimately affect policyholders.
Investors will be eager to hear how L&G will navigate this regulatory issue.