Legal & General rose has sold its US protection business to Japanese firm Meiji Yasuda for £1.8bn.

Meiji Yasuda is one of Japan’s oldest and largest insurers and has also agreed to take an estimated 5% stake in L&G as well as a 20% economic interest in its US pension risk transfer (PRT) arm.

PRTs refer to companies transferring the responsibility of distributing defined benefit pension liabilities onto insurers, often to help boost their balance sheet.

Following the deal, the London-based firm expects to return about 40% of its market cap to shareholders between 2025 and 2027.

António Simões, chief executive of L&G, described it as transformational for the FTSE 100 financial services group, his biggest transaction since taking over in January 2024.

Under a strategy unveiled last June, the Portugal-born CEO is simplifying operations. This has included the sale of housebuilder Cala Homes for £1.4bn to a joint venture including investment firms Sixth Street Partners and Patron Capital.

Referring to his latest deal, he said: ‘This is a transformative transaction that brings significant strategic and financial benefits to the group and demonstrates our commitment to deliver on our strategy.’

Hideki Nagashima, president and CEO of Meiji Yasuda, added: ‘Our intention to acquire a 5 per cent shareholding in L&G reflects our confidence in their leadership, strategy and long-term prospects.’

Russ Mould, investment director at AJ Bell, said the latter move does not necessarily mean Meiji Yasuda is planning a full-blown acquisition.

He said: “While there’s no suggestion this is the precursor to any sort of eventual takeover and it is likely just about cementing the relationship, it may nonetheless set some tongues wagging.”

Legal & General Group shares initially rose strongly but closed just 2.8p (1.17%) higher at 241.7p.