(Bloomberg) -- Legal & General Group Plc agreed to sell its US insurance entity for $2.3 billion, the latest move by Chief Executive Officer António Simões to revamp the financial services firm and boost payouts to shareholders.

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The US insurance entity, which comprises the firm’s local protection and pension risk-transfer businesses, will be sold to Meiji Yasuda Life Insurance Co., according to a statement on Friday. Following completion, the Japanese insurer will own L&G’s US protection business and have a 20% economic interest in its US PRT business. Meiji Yasuda also plans to buy a 5% stake in L&G.

London-based L&G will use £1 billion ($1.24 billion) of the proceeds for share repurchases. Another £400 million will be spent to fund a US PRT reinsurance arrangement with Meiji Yasuda in which the UK insurer will retain 80% interest.

L&G shares surged as much as 11.4% in early London trading, the biggest intraday gain since November 2020.

“This is a transformative transaction that brings significant strategic and financial benefits to the group,” sharpening L&G’s focus on core businesses and “driving sustainable growth to enhance shareholder returns,” CEO Simões said in the statement.

Simões, who took the helm at L&G about a year ago, has unveiled a new strategy for the company that envisioned merging its asset management units and scaling up private-market and higher fee-paying assets. As part of the sweeping changes, with the goal of returning more capital to shareholders from 2024 to 2027, L&G agreed in September to sell UK homebuilder Cala Group with expected cash proceeds of £1.16 billion.

Before joining L&G as CEO, Simões was regional head of Europe for Banco Santander SA. The former McKinsey & Co. partner also spent 13 years at HSBC Holdings Plc earlier, including as CEO of UK and Europe.

Tokyo-based Meiji Yasuda has been seeking acquisitions overseas, particularly in the US, where its subsidiary StanCorp Financial Group Inc. is buying Allstate Corp.’s benefits unit for about $2 billion. The firm’s ambitions reflect bold moves also being made by many of its local rivals, all hunting for growth outside of the country given Japan’s shrinking population.

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The earnings impact from losing a 20% economic interest in the US PRT business is likely to be “minimal,” RBC analysts led by Mandeep Jagpal wrote in a note Friday, noting the protection businesses were assessed by L&G as having less of a strategic fit than other parts of the group.

L&G now expects to return the equivalent of about 40% of its market value to shareholders over 2025 to 2027 through a combination of dividends and buybacks. The transaction, expected to conclude toward the end of 2025 pending regulatory approvals, will also provide capital to invest in growth across L&G’s three core businesses of asset management, institutional retirement and UK retail, it said in the statement.

Reiterating its guidance for full year 2024 of mid-single digit growth in core operating profit, L&G said it was on track to achieve its remaining targets.

What Bloomberg Intelligence Says:

Legal & General’s sale of its US business, which only made $23 million profit in 2023, recognizes L&G’s capital concerns, with the sale to Meiji Yasuda Life at 2.8x net assets boosting Solvency II by 22 percentage points.

— Kevin Ryan & Charles Graham, insurance analysts

--With assistance from Nao Sano.

(Updates with Meiji Yasuda’s ambitions and analyst comment.)

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