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

LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limited has affirmed the issuer credit rating (ICR) of “a” of the non-operating holding company, Legal & General Group Plc (L&G) (United Kingdom), as well as the ratings for all debt issued or guaranteed by L&G. At the same time, A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and ICR of “aa-” of Legal & General Assurance Society Limited(LGAS) (United Kingdom). The outlook for all ratings is stable. (See below for a complete listing of the debt ratings.)

The ratings reflect current good risk-adjusted capitalization for LGAS and robust capitalization at the group level, which is expected to be maintained going forward, together with a resilient business position. A partially offsetting factor is the significant decline in profits the group experienced in 2011, predominantly driven by a sharp decline in unrealised gains on investments.

L&G’s capital position is recovering its strength as capital and surplus as at the financial year ending 31 December 2011 had increased to GBP 5.2 billion, up from GBP 4.8 billion as at the end of the previous year. In 2011, there was a significant reduction in the unallocated divisible surplus (supporting the with-profits fund) predominantly due to unrealised investment losses during the year. This is one of the soft capital elements for which A.M. Best gives credit.

Though L&G is not immune to the volatility of the financial markets, A.M. Best expects the group to remain resilient and to respond positively to the regulatory changes the businesses face in the United Kingdom with the Retail Distribution Review (RDR) and pensions auto-enrolment. Solvency II remains a challenge for the industry, and L&G is making progress enhancing its risk management and corporate governance capabilities to prepare itself for the challenge.

Although L&G’s 2011 IFRS profits before tax of GBP 778 million were 40% lower than the previous year, the group’s cash generation and operating profit figures exceeded prior year. The group suffered a significant decline in unrealised gains in its investment portfolio through its profit and loss account, which was the main contributor of a decline in technical results of 22% to GBP 1.8 billion.

Upward rating movements are unlikely at this point.

Downward rating pressures could emerge from a worsening of the financial and life insurance market conditions in the UK (L&G’s largest market), a significant shift in group strategy or a material decline in risk-adjusted capitalization.

The debt rating of “a” has been affirmed for the following senior debt issues:

Legal & General Finance Plc—

-- GBP 10 million 5.800% senior unsecured notes, due 2041

-- GBP 40 million 5.750% senior unsecured notes, due 2033

-- GBP 200 million 5.875% senior unsecured notes, due 2033

-- GBP 350 million 5.875% senior unsecured notes, due 2031

The debt rating of “a-” has been affirmed for the following:

Legal & General Group Plc—

-- GBP 400 million 5.875% undated subordinated notes

-- EUR 600 million 4.000% subordinated notes, due 2025

-- GBP 600 million 6.385% perpetual preferred securities

-- GBP 300 million 10.000% subordinated notes, due 2041

The indicative rating of “a” has been affirmed for the following debt securities issued under the GBP 2 billion medium term note programme:

Legal & General Finance Plc—

-- Senior debt

The indicative rating of “a-” has been affirmed for the following debt securities issued under the GBP 2 billion medium term note programme.

Legal & General Group Plc—

-- Subordinated debt

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Rating Members of Insurance Groups“; “Insurance Holding Company and Debt Ratings”; “Equity Credit for Hybrid Securities”; and “Catastrophe Analysis in A.M. Best Ratings”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company.Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. BestAnandi Nangy-Kotecha, +(44) 20 7397 0271
Associate Director
[email protected]
or
Carlos Wong-Fupuy, +(44) 20 7397 0287
Senior Director
[email protected]
orRachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
[email protected]
orJim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best