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Best’s News & Research Service - November 01, 2023 02:33 PM (EDT)

AM Best Affirms Credit Ratings of Legal & General Group Plc and Its Rated Subsidiaries

  • November 01, 2023 02:33 PM (EDT)
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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 Rating of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) of L&G’s rated 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 balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management. 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 its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level. The assessment also factors in the group’s moderate financial leverage, which is expected to decrease through continued internal capital generation, and its good interest coverage. A partially offsetting rating factor is L&G’s exposure to potential valuation volatility due to the material portion of real assets in the group’s investment portfolio, although AM Best notes that these assets are matched closely to the group’s liabilities.

L&G has a track record of strong operating performance, as demonstrated by a five-year (2018-2022) weighted average return on equity of 19.6% (as per AM Best’s calculations). Results have been supported by the good performance of the bulk annuity business and the retail operations and have benefited from asset management earnings. In 2022, L&G reported a solid profit before tax of GBP 2.73 billion, up 3.7% from GBP 2.63 billion in 2021. AM Best expects L&G’s operating performance to remain strong prospectively, supported by the group’s excellent market positions in its core products in the UK and the United States, growth in its pension risk transfer (PRT) 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 UK, 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 remained a market leader in the PRT market successfully in recent years, while maintaining pricing discipline. L&G is continuing its international expansion of its PRT share in North America. In addition, Legal & General Investment Management (Holdings) Limited, L&G’s asset management business, provides a degree of geographic diversification to the group’s activities as one of the largest asset managers worldwide.

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 Performance Assessments, 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.

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