AM Best Affirms Credit Ratings of Legal & General Group Plc
In a significant announcement, AM Best has updated the credit ratings for Legal & General Group Plc (L&G), highlighting the company's solid financial standings and market strength. The Long-Term Issuer Credit Rating (Long-Term ICR) of ‘a’ (Excellent) for L&G, along with its Financial Strength Rating (FSR) of A+ (Superior), speaks volumes about its robust operational framework and financial health.
Understanding the Ratings and Their Implications
The assessment by AM Best reflects L&G’s very strong consolidated balance sheet strength and solid operating performance. The FSR and Long-Term ICRs for L&G’s rated subsidiaries were also affirmed as ‘aa-’ (Superior). These ratings signify the strategic importance of these subsidiaries, showcasing their integral role within the L&G group.
Strong Financial Position
At the heart of L&G's ratings is its formidable risk-adjusted capitalisation, which sits at the strongest level according to Best's Capital Adequacy Ratio (BCAR). This robust capital position offers L&G the financial flexibility necessary to navigate various market conditions, further reinforced by their ability to leverage economic capital embedded within the long-term business.
Operating Performance and Market Dynamics
Over the past five years, L&G has demonstrated a noteworthy performance marked by a weighted average return-on-equity (ROE) of 19.6%. This impressive performance has been largely driven by the pension risk transfer (PRT) and retail divisions. Although 2023 saw a dip with an ROE of 9.7% due to unrealised mark-to-market losses, projections suggest a rebound, potentially aligning with historical averages.
Diversification and Market Leadership
L&G maintains a prominent position in the UK market, particularly in the sectors of bulk annuities and protection products. The company's diverse offerings in pension de-risking and retirement solutions showcase its adaptability and innovation within the financial landscape. Furthermore, L&G is strategically expanding into the North American PRT market, capitalising on its established expertise.
Operational Insights and Future Outlook
With plans to grow their asset management sector, which ranks among the largest globally, L&G is poised for continued success. The focus on high-quality financial practices and diverse revenue streams positions the company favorably for future challenges and opportunities.
Subsidiaries Under Affirmation
The following subsidiaries have also had their FSR of A+ and Long-Term ICRs of ‘aa-’ affirmed by AM Best:
- Legal and General Assurance Society Limited
- Banner Life Insurance Company
- William Penn Life Insurance Company of New York
Frequently Asked Questions
What are the main financial ratings affirmed for Legal & General Group?
AM Best affirmed the Long-Term ICR of ‘a’ and the FSR of A+ for Legal & General Group and its subsidiaries.
How does Legal & General's capital position affect its ratings?
The strong capital position enhances the company's financial flexibility, supporting its ability to withstand market fluctuations.
What impact did lower ROE have on the company's ratings?
The dip in ROE in 2023 was factored into the ratings but is expected to improve with market recovery and higher reinvestment yields.
What sectors does L&G operate in predominantly?
Legal & General operates mainly in bulk annuities, protection products, and asset management services across the UK.
How is Legal & General expanding its business?
L&G is expanding into the North American pension risk transfer market while continuing to enhance its asset management capabilities globally.
