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S&P upgrades L&G Re to reflect reinsurer’s core status

4th February 2021 - Author: Luke Gallin

Since its formation in 2014, Legal & General Reinsurance Co. Ltd. (L&G Re) has become an essential part of the group’s reinsurance strategy, leading S&P to upgrade the reinsurer to ‘AA-‘ from ‘A+’ with a stable outlook.

Legal_&_GeneralThe reinsurance coverage provided by L&G Re to the other members of the Legal & General group has made it possible for them to write more business in a capital efficient way, while at the same time has freed up capital to be invested in other projects.

“Therefore, we now consider L&G Re to be core to the group rather than highly strategic,” says S&P.

Adding: “As a result, we have raised our long-term financial strength rating on L&G Re one notch to ‘AA-‘, aligning it with the ratings on the group’s other core operating entities.”

L&G Re provides reinsurance products to core businesses of the group that contributed roughly 60% of the group’s operating profit from divisions as of December 31st, 2019.

As of year-end 2019, L&G Re wrote £11.6 billion in premiums and is fully integrated with the parent, sharing common KPIs, risk frameworks, and corporate governance. During the same year, the reinsurer reported total profit of £455 million and, the reinsurer’s equity accounted for around 14.5% of group shareholder’s equity at year-end 2019.

“We expect that the parent will support L&G Re in times of need and that L&G Re will remain the key reinsurance hub for the group and generate capital efficiencies,” say analysts.

Adding: “As long as we continue to view L&G Re as a core subsidiary, the rating on L&G Re will move in line with the ratings on the other core operating entities of the group.”

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