Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings of Legal & General Group Plc's (L&G) core rated operating entities, Legal & General Assurance Society Ltd, Banner Life Insurance Company and William Penn Life Insurance Company of New York, at 'AA-'.
The ratings reflect L&G's strong capitalisation, operational scale and market position as one of the leading UK life insurers. However, its concentration in the UK market is an offsetting factor. The company's diversification benefit from other markets is limited relative to peers rated in the 'AA' category.
L&G's earnings are well diversified by product type in its main market. In addition, L&G owns one of the UK's leading asset managers, Legal & General Investment Management (LGIM), which adds to the group's earnings diversification and cash generation. In 2014, 23% of L&G's operating profit came from LGIM. L&G generates around 11 % of its sales internationally, predominantly in the US.
Under our insurance rating methodology, we consider Banner Life and William Penn (together, Legal & General America (LGA)) as core to L&G and therefore align their IFS ratings with that of Legal & General Assurance Society Ltd, the other core rated operating entity in the group. Their core status reflects their long ownership by L&G; their importance to L&G's growth strategy; the diversification benefit for L&G between mortality risk in LGA and the longevity risk in the UK business; L&G's long history of direct capital funding to support LGA's growth; materiality (LGA represented 22% of L&G's insurance gross written premiums in 2014 and 11 % of its value of new business); shared management; and consistency of branding.