AM Best Affirms Credit Ratings of Legal & General Group Plc and Its Key Rated Subsidiaries; Upgrades Credit Ratings of Legal & General Reinsurance Company No. 2 Limited

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 (FSR) of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) of L&G’s rated subsidiaries (listed below). At the same time, AM Best has upgraded the FSR to A+ (Superior) from A (Excellent) and the Long-Term ICR to “aa-” (Superior) from “a” (Excellent) of Legal & General Reinsurance Company No. 2 Limited (Bermuda). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect L&G’s consolidated 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 its rated subsidiaries 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 group’s risk-adjusted capitalisation includes meaningful contribution from economic capital embedded in long-term business and equity credit for hybrid debt, which are considered weaker quality in the capital structure. The assessment also factors in the group’s excellent financial flexibility, through its access to capital markets, coupled with good fungibility of capital.

L&G has a track record of strong operating performance, as demonstrated by a five-year (2018-2022, under IFRS 4) weighted average return-on-equity (ROE) ratio of 19.6% (as calculated by AM Best). The profitability of the pension risk transfer (PRT) business and retail division have been the main drivers of returns over the period. Overall performance in 2023 was adversely impacted by material unrealised mark-to-market losses due to higher rates on asset valuations and translated into an ROE of 9.7% (under IFRS 17). AM Best expects, based on the group’s published half-year 2024 results, L&G’s performance for the year to be in line with its historical average, benefitting from higher reinvestment yields, and the unwind of unrealised losses.

The group holds a leading position in the United Kingdom market across bulk annuities, protection products, and asset management services. It benefits from a good diversification of earnings with a comprehensive offering of end-to-end pension de-risking and retirement solutions. L&G is continuing its expansion into the North America PRT market by leveraging its expertise as a leader in the United Kingdom. Moreover, the group’s asset management division provides a further degree of diversification to its business profile as one of the largest asset managers worldwide.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) have been affirmed with a stable outlook for the following subsidiaries:

- Legal and General Assurance Society Limited

- Banner Life Insurance Company

- William Penn Life Insurance Company of New York

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. For more information, visit www.ambest.com.

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