A.M. Best has affirmed the issuer credit rating (ICR) of “a” of the UK-based, non-operating holding company, Legal & General Group (L&G). Concurrently, all debt ratings on debt instruments issued or guaranteed by L&G have been affirmed.
At the same time, A.M. Best has affirmed the financial strength rating (FSR) of “A+ (Superior)” and the ICR of “aa-” of Legal and General Assurance Society Limited (LGAS), the largest operating insurance company in the L&G group. The outlook for all ratings is stable.
According to the agency, the ratings reflect L&G’s “solid business profile, strong earnings and excellent risk-adjusted capitalisation”. L&G is one of the UK’s largest insurance groups, with a well-established and diversified business model, offering a wide range of protection, retirement and investment products.
Gross written premiums increased by 65 percent to £10.2 billion in 2014, with all business segments experiencing strong revenue growth. L&G confirmed its leadership position in the bulk purchase annuity segment last year, when it wrote £6 billion of new transactions, including the UK’s largest deal to date.
Legal & General Investment Management, the group’s asset managers, continued its international expansion in Asia and the US, thus reducing to some extent its concentration in its domestic market.
According to A.M. Best, L&G is not immune to the low interest rate environment, financial volatility and regulatory risks that are affecting its core market, though the group’s business diversification will “likely enable a resilient financial performance going forward” and reduces its dependence on LGAS.
Elsewhere, A.M. Best has placed under review with negative implications the FSR and the ICR of the insurance subsidiaries of ACE Limited (ACE), as well as the ICR and senior debt ratings of “a+” of ACE.
The rating actions follow the recent announcement that ACE entered into a definitive agreement to acquire The Chubb Corporation and its subsidiaries.
The rating actions reflect what A.M. Best has called the “uncertainty” regarding ACE’s ability to execute on its plan given the complexity, size and scope of the acquisition.
A.M Best stated: “The proposed transaction combines two high quality insurance organisations with experienced management teams, complementary business scopes, global capabilities and adequate risk-adjusted capital positions.”
“To this point, following the close of the transaction, the level of debt and goodwill created serve to limit the consolidated group’s risk-adjusted capital position and increase its debt leverage on a total and tangible capital basis.”
The agency has confirmed that the “under review” status will be removed shortly after the transaction has closed and the opportunity arises to review the final integration plan and financial position.
Finally, A.M. Best has affirmed the FSR of “A- (Excellent)” and the ICR “a-” of International General Insurance Company Limited (IGI) of Bermuda and International General Insurance Company of the UK (IGIUK).
A.M. Best also has affirmed the ICR of “bbb-”of International General Insurance Holdings Limited (IGIH), based in the United Arab Emirates. The outlook for all ratings remains stable.
According to the agency, the ratings of IGI reflect its “solid risk-adjusted capitalisation, consistently good technical performance and diversified business profile”. A.M. Best also added that the ratings of IGIUK benefit from rating enhancement from IGI, given its “strategic importance” to the group.
IGIUK is seen as fundamental to IGI’s overall strategy and is integrated into the group through shared management functions and its intragroup reinsurance programme.
Additionally, IGIUK’s financial solvency is explicitly guaranteed by IGI. In line with the A.M. Best rating methodology, standard notching is applied to IGIH, the group’s holding company.
A.M. Best has confirmed that it expects IGI’s capital position to be further strengthened by high earnings retention, maintaining a sufficient capital buffer to absorb the company’s strategic initiatives over the next two years.
IGI continues to diversify its business through the introduction of new products whilst expanding geographically.
Although energy accounts for the largest share of premium revenue, property and engineering have been growing in importance. Additionally, IGI operates in a number of platforms worldwide, allowing it access to a broad spread of risks.
