TIDMLGEN
RNS Number : 0985Q
Legal & General Group Plc
16 June 2020
L&G plans to capitalise on favourable market conditions to
issue RT1 debt; opportunity to reinforce balance sheet strength and
underpin growth role in uncertain post-COVID-19 economy
Legal & General Group Plc ("Legal & General") announces
that it will arrange a series of fixed income investor calls
commencing today, 16 June. A benchmark issue of GBP denominated Reg
S Perpetual non-call 11.25 year Contingent Convertible Restricted
Tier 1 notes will follow, subject to market conditions. The notes
are expected to be rated [Baa3] by Moody's and [BBB] by
S&P.
Our decision to issue RT1 debt is motivated by favourable bond
market conditions and serves as a further measure of prudence,
since the longer-term economic impact of COVID-19 remains
uncertain. This debt issuance also positions us strongly for the
recovery phase from COVID-19, continuing our established Inclusive
Capitalism strategy.
Legal & General's solvency position is robust and our
operational performance is resilient, supported by a strong new
business pipeline. Our asset portfolio continues to perform well in
absolute and relative terms, in light of the economic impact of
COVID-19.
We continue to support our customers, employees and society at
large as we seek collectively to emerge from COVID-19. For more
details of our efforts to help society through the pandemic, please
refer to our website:
www.legalandgeneralgroup.com/media-centre/in-the-news/our-response-to-covid-19-the-coronavirus/
Balance sheet strength
Legal & General's balance sheet is strong and the solvency
ratio is robust. We expect our shareholder solvency ratio at half
year to be in a range of 162% to 167% and a surplus over the
Solvency Capital Requirement (SCR) of circa GBP6 billion. These
estimates do not include the proposed RT1 debt issuance, and assume
unchanged market conditions to the end of June.
Our GBP76.9 billion annuity portfolio(1) continues to outperform
markets on downgrades and defaults due to thoughtful asset
allocation and active asset management. For example, we have
limited exposure to airlines, hotel, leisure and traditional retail
which together represent less than 2% of our portfolio(2) .
Downgrades within investment grade have minimal impact on our
solvency ratio. Our defensive positioning has meant that we have
outperformed the downgrade experience of the market, with just
0.65% of our traded credit portfolio (excluding gilts) downgraded
to sub-investment grade.(3) While we have had no defaults year to
date, our balance sheet remains underpinned by a credit default
reserve of GBP3.2 billion(2) . The annuity portfolio's direct
investments continue to perform strongly, with 99% of scheduled
cash-flows paid year to date, reflecting the high quality of our
counterparty exposure.
Business update
Legal & General remains well placed to deliver strong,
attractive growth and returns in our core markets, which are
aligned to our six, long-term, structural growth drivers: ageing
demographics, globalisation of asset markets, investing in the real
economy, welfare reforms, technological innovation and addressing
climate change.
Our business continues to perform strongly, broadly in line with
prior year.
-- Our growing annuity portfolio GBP76.9bn(1) , which underpins
our Institutional and Retail Retirement businesses, is a resilient
source of profits and capital generation. In respect of new
business:
o LGRI (our Institutional Retirement business) has transacted
GBP2.8 billion of global Pension Risk Transfer (PRT) across 25
transactions to 5 June, and we expect a further GBP0.6 billion of
PRT transactions during June. Additionally, LGRI is actively
quoting on a further global PRT pipeline of more than GBP25
billion.
o LGRR (our Retail Retirement business) delivered GBP337 million
of annuity premiums to the end of May, down 17% year on year, and
made GBP315 million of lifetime mortgage advances over the same
period, down 21% on the prior year.
-- LGIM (our Investment Management business) achieved external
net flows of GBP11.2 billion to the end of May and total AUM is
estimated at GBP1,233 billion. Over the period, external revenue
increased 9% to GBP385 million.
-- LGC (our early-stage investment business) is now beginning to
reopen its house-building operations, with enhanced safety
procedures. Whilst the market is still returning to normal, we are
starting to see more sustained consumer demand for housing of all
types and tenures. We continue to secure planning permissions in
the UK to meet Later Living and Affordable Housing needs. LGC has
made further investments in decarbonisation, with its clean energy
investment portfolio now covering low carbon heat, transport and
power generation.
-- LGI (our insurance business) has achieved GBP1,240 million of
total gross written premiums to the end of May, up 4% on the prior
year. We continue to monitor mortality claims closely.
"L&G is performing strongly. Accessing this market
opportunity now both strengthens our capacity to deal with
post-COVID economic uncertainty and enables us to play a fuller
part in the investment-led recovery which will be needed as we
emerge from this pandemic."
Nigel Wilson, Group Chief Executive
1 As at 1 June 2020.
2 As at 31 December 2019.
3 We have experienced less than GBP300 million of downgrades to
sub-investment grade within our traded credit portfolio; this is
approximately 40% of the downgrades to sub-investment grade implied
by market experience.
Notes to editors
Legal & General Group Plc
Established in 1836, Legal & General is one of the UK's
leading financial services groups and a major global investor, with
international businesses in the US, Europe, Middle East and Asia.
With over GBP1.2 trillion in total assets under management, we are
the UK's largest investment manager for corporate pension schemes
and a UK market leader in pension risk transfer, life insurance,
workplace pensions and retirement income.
As at 15 June 2020, Legal & General has a market
capitalisation of GBP13.7 billion.
Forward-looking statements
This announcement may contain certain forward-looking statements
relating to Legal & General, 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
acquisitions or combinations within relevant industries. As a
result, Legal & General'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 does not undertake to update forward-looking
statements contained in this announcement or any other
forward-looking statement it may make.
Further information
Investors
Edward Houghton Head of Investor Relations +44 (0)7585
905799
Alyssa Manning Investor Relations Director +44 (0)20 3124
2047
Sujee Rajah Investor Relations Director +1 312 964 3034
Media
John Godfrey Corporate Affairs Director +44 (0)1989 750131
Graeme Wilson Tulchan Communications +44 (0)7720 414235
Sheebani Chothani Tulchan Communications +44 (0)7805 011046
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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