The US is regarded as something of a graveyard for European insurers, as a string of well reported ventures by overseas life companies, into what is a highly competitive life market, have failed to bear fruit. L&G's CEO Nigel Wilson's recent interview with the Financial Times casts some light on the scale of the firm's ambitions. But why might L&G succeed where others have failed?
For one thing, L&G appears focused on replicating its UK mix of corporate pensions asset management and annuities de-risking activity in the US. LGIM has established a firm bridgehead in the States, managing £127bn in assets for largely corporate pension schemes - many of which are exposed to the same longevity risks and funding stresses which can be found within the UK defined benefit system. As a result, the company has become a market leader in 'flightpath' discussions for pension schemes which are looking to embark upon a gradual, asset based journey towards a de-risking endgame. Mortality and liability profiles in the US are strikingly similar to those encountered in the UK and this is an area in which the company already possesses a vast body of expertise. Moreover, the US de-risking market is widely expected to experience significant growth over the next ten years or so.
...So in effect the company would be offering a mirror image of its European, capital-heavy business model in the US. This might mean that it can leverage the significant investments it's made in the real assets category which have become a defining point of the firm's growth over the past five years or so. That said, the infrastructure and private placement debt investing categories in the US are highly competitive - so much could depend on the firm's ability to source, analyse and successfully securitise and place an ever wider spectrum of credit assets on both continents.
Legal & General is targeting acquisitions in the US as it takes aim at the world’s biggest insurance market and one of the most difficult regions for European companies to crack. Speaking to the Financial Times, chief executive Nigel Wilson says he wants to replicate the company’s UK model of investing in assets such as infrastructure to match the long-term products it sells to customers. “In direct investments we may need to do a bolt-on acquisition in the US,” he says. If Mr Wilson manages to turn the UK insurer into a significant operator in the US insurance market, he will have succeeded where many others have failed. Over the past two decades other European companies have attempted the same feat but, with a few exceptions (such as Prudential), many have had to pull back or withdraw entirely.