A.M. Best Affirms Ratings of Legal & General Assurance Society Limited and Legal & General Group plc.OLDWICK, N.J. -- Please replace the release with the following corrected version due to multiple revisions. The corrected release reads: A.M. BEST AFFIRMS RATINGS OF LEGAL & GENERAL ASSURANCE SOCIETY LIMITED AND LEGAL & GENERAL GROUP PLC A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength rating (FSR (Free System Resource) In Windows 3.x, the amount of unused memory in various 64K blocks reserved for managing current applications. Every open window takes some space in this area. See Windows memory limitation. ) of A+ (Superior) and the issuer credit rating (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) of "aa" of Legal & General Assurance Society Limited (L&G ASL ASL - Algebraic Specification Language ) (United Kingdom). At the same time, A.M. Best has affirmed the ICR of "a+" of the non-operating holding company, Legal & General Group plc (L&G), as well as the ratings for all debt issued or guaranteed by L&G. (See below for a complete list of ratings.) The outlook for all ratings remains stable. The ratings reflect the group's very strong business profile in the United Kingdom and very strong risk-adjusted capitalisation, which is likely to decline over the next three years. Offsetting factors are the decline in new business profit margins and increasing exposure to longevity longevity (lŏnjĕv`ĭtē), term denoting the length or duration of the life of an animal or plant, often used to indicate an unusually long life. risk. New business premiums on an annual premium equivalent basis grew by 8% in 2007, with the effects of the pensions "A-day" continuing to provide strong growth opportunities in the UK pensions market. Demand for unit linked products remains strong, while protection business is declining mainly due to increasing competition for group risks. A.M. Best believes that new business growth will slow down in 2008 due to challenging market conditions for bulk purchase annuities (BPA BPA British Paediatric Association. ) and property linked protection products. Consolidated gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. are likely to grow by 5% in 2007 to approximately GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 4.5 billion (USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 9.3 billion), with more than 93% being life business and 7% non-life. A.M. Best believes that L&G's pre-tax profit will decline by approximately 34% in 2007 to approximately GBP 1.3 billion (USD 2.7 billion) due to the lack of one-off items that impacted the 2006 financial performance. New business profits declined by 8% in the first half of 2007 mainly due to reduced margins for unit linked business and a shift in demand in the pensions and annuities segments towards less profitable products. While business margins are on the high end of those experienced in the UK market, their decline is likely to continue. Non-life business is likely to report a loss in 2007 due to weather-related losses, which resulted in a GBP 38 million (USD 78 million) loss in the first half of the year with a further GBP 30 million (USD 62 million) in losses anticipated in the second half of the year. Investment performance remains strong with investment income likely to remain relatively stable year on year, yet still highly dependent on capital gains. L&G's very strong risk-adjusted capitalisation improved further during the first half of 2007 despite increased dividend payments. Prospective risk-adjusted capitalisation will be defined by the company's decision to buy back GBP 1 billion (USD 2.1 million) of capital and increase dividend payments. A.M. Best believes that the gradual impact of the on-market buy-back programme, combined with the reduced risk profile of the business undertaken, means that risk-adjusted capitalisation will remain in line with the current ratings. Further, L&G's risk-adjusted capitalisation will rely increasingly on soft capital in the form of value of in-force Value of In-Force is a life insurance term for the present value of the profits that will emerge from a block of life insurance policies over time. The value of in-force business is the present value of expected future earnings on in-force business less the present value business and subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". . The company's excellent leverage is likely to increase and come in line with that of its key UK competitors following its recent capital review. A.M. Best has assigned an "a+" rating to the GBP 600 million 6.385% perpetual preferred securities issued by Legal & General Finance plc. The ratings of "a+" on the existing senior debt issues have been affirmed for the following: 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 ratings of "a" of the existing subordinated debt issues have been affirmed for the following: Legal & General Group plc-- -- GBP 400 million 5.875% undated un·dat·ed adj. 1. Not marked with or showing a date: an undated letter; an undated portrait. 2. subordinated notes -- EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 600 million 4.000% subordinated notes, due 2025 The following indicative ratings have been affirmed for debt securities issued under the GBP 2 billion Medium Term Note Programme: Legal & General Finance plc-- -- "a+" Senior debt The following indicative ratings have been affirmed for debt securities issued under the USD 2 billion Medium Term Note Programme: Legal & General Group plc-- --"a" Subordinated debt Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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