Ratings upgrade for Legal & General’s Bermuda reinsurer

Legal & General’s Bermuda-based reinsurer has had its financial strength rating  upgraded from A to A+ by AM Best . 

The agency said the outlook for  Legal & General Reinsurance Company No. 2 (Bermuda) is stable.

The rating increase brought the Bermuda long-term reinsurer, led by chief executive officer Amy Ellison (pictured), in line with its parent company and its other subsidiaries. The outlook for those companies is also stable. 

AM Best said L&G has a track record of strong operating performance, demonstrated by a five-year weighted average return-on-equity ratio of 19.6%. 

“The profitability of the pension risk transfer business and retail division have been the main drivers of returns over the period,” the agency said. “Overall performance in 2023 was adversely impacted by material unrealised mark-to-market losses due to higher rates on asset valuations and translated into an ROE of 9.7%. 

“AM Best expects, based on the group’s published half-year 2024 results, L&G’s performance for the year to be in line with its historical average, benefitting from higher reinvestment yields, and the unwind of unrealised losses.”

The ratings agency said the group holds a leading position in the UK market across bulk annuities, protection products and asset management services. 

“It benefits from a good diversification of earnings with a comprehensive offering of end-to-end pension de-risking and retirement solutions. 

“L&G is continuing its expansion into the North America PRT market by leveraging its expertise as a leader in the United Kingdom. Moreover, the group’s asset management division provides a further degree of diversification to its business profile as one of the largest asset managers worldwide.”

AM Best said L&G’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level. The group’s risk-adjusted capitalisation includes meaningful contribution from economic capital embedded in long-term business and equity credit for hybrid debt, which are considered weaker quality in the capital structure. 

“The assessment also factors in the group’s excellent financial flexibility, through its access to capital markets, coupled with good fungibility of capital,” AM Best said. 

The FSR of A+ have been affirmed with a stable outlook for the following subsidiaries: Legal and General Assurance Society; Banner Life Insurance Company; and William Penn Life Insurance Company of New York. 

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