Legal & General Group PLC (LON:LGEN) has agreed to sell its general insurance division to Allianz Holdings PLC as part of its strategy to offload non-core businesses.
Allianz Holdings will pay an initial £242mln at the completion of the deal and potential further payments over a three-year period from ongoing commercial arrangements.
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L&G said it expects the deal will strengthen its balance sheet, adding 2% to its Solvency II capital ratio.
The group will use proceeds from the disposal to reinvest in its core businesses.
The sale of the general insurance business, which includes retail customers who hold household insurance policies, is part of the wider strategy to streamline the business.
In recent years, the company has sold its savings businesses including Mature Savings, Suffolk Life and Cofunds, its international insurance businesses and a number of other non-core businesses. The disposals have generated proceeds in excess of £1.5bn.
Right decision for customers and shareholders
"Selling the general insurance business is the right decision for our customers and shareholders,” said L&G chief executive Nigel Wilson.
He added: "We continue to focus on delivering against our strategy, allocating shareholders' capital rigorously.
"Our GI customers will benefit from the strength and capability of Allianz in the household insurance sector."
In afternoon trading, L&G shares were 1.2% lower at 256.90p.
In a note commenting on the disposal, UBS maintained a 'sell' rating and target price of 225p on the FTSE 100-listed firm.
The Swiss bank's analysts said: "Strategically, we believe it makes sense and the price of c.1.4x own funds (normalised price-earnings circa. 9-10x) is at the high end of recent insurance sector multiples (0.5-1.4x).
"We expect proceeds will help fund annuity growth and capital strain, with underlying surplus generation not covering the dividend. We see limitations to this strategy and continue to see medium-term constraints between growing, maintaining solvency and paying dividends."
LV mop-up too for Allianz
Allianz also announced on Friday that it had agreed to buy out the 51% of LV General Insurance that it did not already own from Liverpool Victoria Friendly Society for up to £578mln.
The German insurer bought an initial 49% in LV’s general insurance business in 2017 in a £713mln deal.
The two deals will make Allianz the second biggest general insurer in the UK with £4bn of revenue and a 9% market share.
-- Adds details of second Allianz purchase, updates L&G share price --