A.M. Best Affirms Ratings of Legal & General Group Plc and Legal and General Assurance Society Limited
August 26 2016 - 1:00PM
Business Wire
A.M. Best has affirmed the issuer credit rating (ICR) of
“a” of the non-operating holding company, Legal & General
Group Plc (L&G) (United Kingdom). Concurrently, all issue
ratings on debt instruments issued or guaranteed by L&G have
been affirmed. At the same time, A.M. Best has affirmed the
financial strength rating of A+ (Superior) and the ICR of “aa-” of
Legal and General Assurance Society Limited (United
Kingdom), the largest operating insurance company in the L&G
group. The outlook for each of the ratings is stable. (See below
for a complete listing of issue ratings.)
The ratings reflect L&G’s strong earnings track record,
solid business profile and excellent risk-adjusted capitalisation.
An offsetting rating factor is the difficult market environment
affecting life insurance companies in the United Kingdom
(U.K.).
L&G has a strong earnings record, as demonstrated by a
five-year average return on equity of 14.6% (as per A.M. Best’s
calculations, which include exceptional income and expenses). In
2015, L&G’s profit after tax increased by 10.3% to GBP 1.1
billion, driven by growth across the group’s asset management
divisions. Return on equity remained strong at 17.6%, reflecting
good results from underwriting and asset management.
However, low interest rates, financial market volatility and
regulatory changes in L&G’s core market are expected to put
pressure on prospective performance. In addition, any negative
impact on investor and consumer confidence following the U.K.’s
vote to leave the European Union will likely affect revenue and
profitability. In spite of these pressures, A.M. Best expects
results to remain good, supported by the group’s strong market
position in the U.K. and its increasingly diversified business
profile.
L&G is one of the U.K.’s largest insurance groups, with a
well-established and diversified business model, offering a wide
range of protection, retirement and investment products. The group
has reinforced its leadership position in the bulk purchase annuity
segment in recent years through some of the largest transactions
completed in the market to date. In addition, Legal & General
Investment Management, the group’s asset management business, has
successfully continued its international expansion in Asia and the
United States, thus reducing to some extent its concentration in
its domestic market.
L&G has maintained an excellent level of risk-adjusted
capitalisation over the past five years, underpinned by robust
retained earnings. Risk-adjusted capitalisation is expected to
remain strong, in spite of an increase in exposure to illiquid
direct investments. L&G’s financial leverage and interest
coverage ratios remain within tolerance levels for the company’s
rating.
The following issue ratings have been affirmed:
Legal & General Finance Plc—
-- “a” on GBP 10 million 5.800% senior unsecured notes, due
2041
-- “a” on GBP 40 million 5.750% senior unsecured notes, due
2033
-- “a” on GBP 200 million 5.875% senior unsecured notes, due
2033
-- “a” on GBP 350 million 5.875% senior unsecured notes, due
2031
Legal & General Group Plc—
-- “a-” on GBP 400 million 5.875% undated subordinated notes
-- “a-” on GBP 600 million 6.385% undated subordinated notes
-- “a-” on GBP 300 million 10.000% subordinated notes, due
2041
The following indicative issue ratings have been affirmed for
securities issued under the GBP 4 billion medium-term note
programme:
Legal & General Finance Plc—
-- “a” on senior debt
Legal & General Group Plc—
-- “a-” on subordinated debt
This press release relates to rating(s) that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20160826005568/en/
A.M. BestCharlotte VigierSenior Financial
Analyst+44 20 7397
0270charlotte.vigier@ambest.comorTim
PrinceAssociate Director, Analytics+44 20 7397
0203timothy.prince@ambest.comorChristopher
SharkeyManager, Public Relations+1 908 439 2200, ext.
5159christopher.sharkey@ambest.comorJim
PeavyAssistant Vice President, Public Relations+1 908
439 2200, ext. 5644james.peavy@ambest.com