Press Release - NOVEMBER 10, 2017

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

 Anthony Silverman
Senior Financial Analyst
+44 20 7397 0264

Tim Prince
Associate Director, Analytics
+44 20 7397 6320

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


A.M. Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of the non-operating holding company, Legal & General Group Plc (L&G) (United Kingdom). Concurrently, all Long-Term Issue Credit Ratings (Long-Term IRs) 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 Long-Term ICR of “aa-” of Legal and General Assurance Society Limited (United Kingdom), the largest operating insurance company in the L&G group. The outlook of these Credit Ratings (ratings) is stable. (See below for a complete listing of Long-Term IRs.) Subsequently, A.M. Best has withdrawn the Long-Term IRs, as the company has requested to no longer participate in A.M. Best’s interactive rating process on its debt instruments.

The ratings reflect L&G’s very strong balance sheet strength, strong operating performance, favourable business profile and appropriate enterprise risk management. L&G has a strong earnings record, as demonstrated by a five-year average return on equity of 15.5% (as per A.M. Best’s calculations). In 2016, L&G’s profit after tax increased by 15.6% to GBP 1.3 billion, driven by growth in the annuity business, a conservative release of longevity reserves, favourable equity market and foreign exchange effects, and solid performances across the group’s other divisions. Return on equity remained strong at a company reported 19.6%, reflecting the good results.

A narrow active product range and a concentrated geographic footprint increase the company’s sensitivity to U.K. regulatory changes. In addition, L&G’s expanding commitment to real assets increases the company’s sensitivity to any permanent reduction in expected returns from these assets. However, A.M. Best expects results to remain strong, supported by the group’s excellent market position in the U.K., its increasingly diversified business profile and careful management of its investment portfolio, including close matching of liabilities.

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. A.M. Best expects the company’s risk-adjusted capitalisation to remain very 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 ratings.

The following Long-Term IRs have been affirmed and concurrently withdrawn at the company’s request:

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 300 million 10.000% subordinated notes, due 2041

The following indicative Long-Term IRs have been affirmed and concurrently withdrawn at the company’s request 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 Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.

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