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FOR IMMEDIATE RELEASE
LONDON - JULY 02, 2015 11:25 AM (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 debt 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 (LGAS) (United Kingdom), the largest operating insurance company in the L&G group. The outlook for all ratings is stable. (See below for a complete listing of debt ratings.)
The ratings reflect L&G's solid business profile, strong earnings and excellent risk-adjusted capitalisation. L&G is one of the UK's largest insurance groups, with a well-established and diversified business model, offering a wide range of protection, retirement and investment products. Gross written premiums increased by 65% to GBP 10.2 billion in 2014, with all business segments experiencing strong revenue growth. L&G confirmed its leadership position in the bulk purchase annuity segment last year, when it wrote GBP 6 billion of new transactions, including the UK's largest deal to date. Legal & General Investment Management, the group's asset managers, continued its international expansion in Asia and the U.S., thus reducing to some extent its concentration in its domestic market.
L&G is not immune to the low interest rate environment, financial volatility and regulatory risks that are affecting its core market. However, the group's business diversification will likely enable a resilient financial performance going forward and reduces its dependence on LGAS, historically the group's main profit contributor. L&G's profits after tax increased by 9% to GBP 992 million in 2014, driven by growth across all divisions.
L&G has maintained excellent risk-adjusted capitalisation over the past five years, underpinned by the very good quality of its fixed income portfolio and robust retained earnings. Despite L&G's increasing exposure to illiquid direct investments, risk-adjusted capitalisation is expected to remain strong. The group's financial leverage remains within tolerance of the current ratings. Financial leverage and interest coverage ratios for L&G remain within tolerance levels.
The following debt 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% perpetual preferred securities
— "a-" on GBP 300 million 10.000% subordinated notes, due 2041
The following indicative ratings have been affirmed for securities issued under the GBP 3 billion medium term note programme:
Legal & General Finance Plc—
— "a" on senior debt
Legal & General Group Plc—
— "a-" on subordinated debt
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
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 visit A.M. Best's Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.