Legal & General America announces it has entered into an agreement with the US subsidiary of Royal Philips (NYSE:PHG, AEX: PHIA) to provide retirement payments under a group annuity contract to approximately 14,000 of Philips' US retirees and other former employees, which will reduce the firm's pension obligations upon the closing of the contract in early December.
The transfer by Philips of approximately $900 million of current retiree pension obligations is being split between Legal & General America and The Prudential Insurance Company of America, with each insurer providing 50 percent of the total monthly benefits to Philips' retirees. Furthermore, American United Life Insurance Company, a OneAmerica company, will be issuing annuities to plan participants who had not yet retired by May 2015, bringing the total transaction between the three insurance companies to $1.1 billion and covering a total of 17,000 plan participants.
We are very pleased to have signed an agreement with Philips for our first US pension group annuity contract. The US is a key market for Legal & General. We have a successful US life assurance business, are rapidly growing our investment management business, and have now entered the US pension risk transfer market. We are a leader in these markets in the UK, and plan to be a major participant in them in the US.
This is an important milestone for our US pension risk transfer business. We are proud to have been selected by Philips and its respected advisers for this landmark deal. We look forward to continuing to deliver innovative pension de-risking solutions to our US clients, particularly as the trend toward split deals continues to evolve.
The Philips deal marks Legal & General's first pension risk transfer transaction in the US and expands upon the established success of its existing US entities, Legal & General Investment Management America (“LGIMA”) and Legal & General America (“LGA”). LGIMA will manage the assets for the US pension risk transfer (“PRT”) business and LGA's Banner Life Insurance Company (Banner) will be the entity issuing the group annuity contract.
Legal & General's entrance into the US PRT market is one that combines nearly thirty years of bulk annuity and PRT expertise in the UK with its proven US investment capabilities. It has amassed a global annuity book of over $68 billion as of June 30, 2015 and guarantees annuity benefits to over a million annuitants.
In recognition of the global nature of pension risk management challenges, Chicago-based LGIMA was established in 2006, and became SEC registered in 2009. LGIMA's platform is centered on providing pension de-risking solutions to a focused client base of pension and insurance clients. This customized and focused approach, together with core competencies in credit sensitive fixed income, liability driven investing (“LDI”), and index strategies has led to the rapid growth of LGIMA which manages $117 billion in total assets under management as of June 30, 2015 spanning 115 clients, including five of the top ten largest US corporate defined benefit plans based upon assets.
The addition of the US PRT platform will enable Legal & General to provide a complete range of pension de-risking solutions to its US clients.
Established in 1836, Legal & General is a leading provider of insurance, savings and investment management products in the UK. The Group has a market capitalisation of £14.2bn (as at 30 September 2015) and is responsible for investing £726bn worldwide (as at 30th June 2015) on behalf of investors, policyholders and shareholders. We have over ten million customers worldwide. In 2014 Legal & General's operating profit (on the IFRS basis) was £1,275m and earnings per share were 16.70p for the period, an increase of 10% for both respectively.
For more information on Legal & General, please see http://www.legalandgeneralgroup.com/
For over 65 years, the Legal & General America companies have been in the business of providing financial protection through life insurance for American families. The Legal & General America companies are Banner Life Insurance Company and its subsidiary William Penn Life Insurance Company of New York. With more than $73 billion in new coverage issued in 2014, LGA ranked fifth in the U.S. and ended 2014 with in excess of $634 billion of coverage in force with nearly 1.2 million U.S. customers. LGA shares Legal & General's independent financial strength ratings: A+ Superior from A. M. Best and AA- Very Strong from Standard and Poor's and Fitch. Gene R. Gilbertson serves as the President and Chief Executive Officer of LGA.
Legal & General Investment Management America, Inc. (LGIMA) is a Chicago-based registered investment advisor specializing in index, active fixed income and liability driven investment (LDI) strategies for the US institutional market. LGIMA was founded in 2006 as a wholly-owned subsidiary of Legal & General Investment Management (Holdings) Ltd. (LGIM(H)), which also owns its affiliates Legal & General Investment Management Ltd. and LGIM International Ltd. In May 2014, LGIMA became a wholly owned subsidiary of Legal & General Investment Management US (Holdings) (LGIMUS(H)) which is wholly owned by LGIM(H).
Nothing in this announcement should be construed as a profit forecast. This document may contain certain forward-looking statements relating to Legal & General Group, its plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve uncertainty because they relate to future events and circumstances which are beyond Legal & General's control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory and Governmental authorities, the impact of competition, the timing impact of these events and other uncertainties of future acquisition or combinations within relevant industries. As a result, Legal & General Group's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in these forward-looking statements and persons reading this announcement should not place reliance on forward-looking statements. These forward-looking statements are made only as at the date on which such statements are made and Legal & General Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.