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A.M. Best Affirms Ratings of Legal & General Group Plc and Legal and General Assurance Society Limited


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Charlotte Vigier
Senior Financial Analyst
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charlotte.vigier@ambest.com

Tim Prince
Associate Director, Analytics
+44 20 7397 0203
timothy.prince@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - AUGUST 26, 2016 12:27 PM (EDT)
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 exceptionl 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.


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