Best’s News & Research Service - December 03, 2021 10:36 AM (EST)
AM Affirms Credit Ratings of Legal & General Group Plc and Its Subsidiaries
- December 03, 2021 10:36 AM (EST)
London //BestWire// - AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) of the non-operating holding company, Legal & General Group Plc (L&G) (United Kingdom). Concurrently, AM Best has affirmed the Financial Strength Ratings of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) of L&G’s subsidiaries: Legal and General Assurance Society Limited (LGAS) (United Kingdom); Banner Life Insurance Company (Banner Life) (Frederick, MD); and William Penn Life Insurance Company of New York (William Penn) (Valley Stream, NY). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect L&G’s very strong balance sheet strength, strong operating performance, favourable business profile and appropriate enterprise risk management (ERM). The ratings of LGAS, Banner Life and William Penn factor in their strategic importance to L&G, and their integration within the group.
L&G’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level. The assessment considers the group’s good organic capital generation and moderate financial leverage with good interest coverage. Offsetting factors include the exposure to valuation uncertainty and volatility due to the material portion of real assets in L&G’s investment portfolio, although AM Best notes that these assets are closely matched to the group’s liabilities.
L&G has a track record of strong operating earnings, as demonstrated by a five-year weighted average return on equity (ROE) of 20.4% (as per AM Best’s calculations) over the 2016-2020 period. Longevity releases contributed approximately 2 percentage points to the 2020 ROE of 16.5%. The group’s ROE also benefits from asset management earnings. In 2020, L&G’s results remained strong, despite the negative impact of the global economic slowdown associated with the COVID-19 pandemic, with a profit before tax of GBP 1.86 billion (including GBP 0.36 billion from discontinued operations), compared with GBP 2.18 billion in 2019. AM Best expects L&G’s strong performance to be maintained, supported by the group’s excellent market positions in its core products in the United Kingdom and the United States, growth in its pension risk transfer business, and careful management of its investment portfolio, with close matching of liabilities.
L&G is one of the largest providers of individual life insurance products in the United Kingdom, with a well-established business model focused on activities with good medium-term sales prospects in which it holds leading positions. The group offers protection, retirement and investment products. L&G has defended its leading position in the pension risk transfer market successfully in recent years with some of the largest transactions completed in the segment to date. In addition, Legal & General Investment Management (Holdings) Limited, L&G’s asset management business, has continued its international expansion successfully in the United States and Asia, thus providing an increasing degree of geographic diversification to the group’s activities whilst reporting significant growth in assets under management.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.