US Capital Restructuring

RNS Number : 0924N

Legal & General Group Plc

25 September 2012

 



Press Release

25 September 2012

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    LEGAL LEGAL & GENERAL ANNOUNCES FURTHER US CAPITAL RESTRUCTURING.

Legal & General's US subsidiary, L&G America Inc (LGA) has delivered the third phase in its capital efficiency programme on 24 of September.  As a result, LGA's capital position has improved by $200m which will support continued growth in new protection business.  The benefit for L&G Group's IGD position is £88m.

We are pleased to have delivered this phase as indicated at the 2012 half-year results. To date, a total of $390m of capital relief has been achieved, along with a total IGD benefit of £230m.  We intend to undertake further phases in the next year.

Phase	Date	Summary	LGA Capital Relief $m (£m)	Benefit to L&G Group IGD Surplus £m
1	Dec 2010	Buyback at a discount of external debt of Triple-X funding vehicle and replacement with internal reinsurance structure	90 (58)	82
2	Dec 2011	Further replacement of Triple-X solution	100 (65)	60
3	Sept 2012	Further replacement of Triple-X solution	200 (1231)	88

¹Closing Exchange rate on 24 of Sept 1.6202

LGA continues to build sales momentum with H1 2012 APE increased to $66m (H1 2011 $52m, H1 2010 $33m).  Ordinary dividend remittances to L&G Group have grown from $nil in 2009 to $50m in 2010, $55m in 2011 and $60m in H1 2012.  In January 2012, Standard & Poor's raised the financial strength rating for LGA from A+ to AA-, reflecting its strong competitive position, conservative investment portfolio and strong liquidity position, coupled with the stable outlook of the parent.

Background

Legal & General America Inc (LGA) is a wholly owned subsidiary of Legal & General Group plc.  It was established in 1981 upon the acquisition of Banner Life, and subsequently William Penn.  LGA focuses on writing mortality protection products.  LGA competes in the protection market by focusing on being a low cost operator and delivering expert, medical-based underwriting on higher sum assured policies.  LGA has in-force premiums of approximately $836m (FY 2011), and in H1 2012, delivered $81m of IFRS operating profit before tax with a new business margin of 10.9%.

US Life insurance reserves represent portions of current and past premiums held as reserves to fund higher future claims as insured lives age.  Because of US Triple-X regulatory requirements, LGA is required to hold reserves that are much greater than reasonably conservative future expected mortality should require. These reserves are often referred to as 'excess' or 'redundant' Triple-X reserves.   Our strategy for LGA has focused on improving capital efficiency and cash flow from the US business to the UK parent.

Enquiries

Investors:

Kate Vennell	Head of Investor Relations	0044 20 3124 2150
Ian Baker	Investor Relations Manager	0044 20 3124 2047

Contacts at LGA in the US

Gene R. Gilbertson

Executive Vice President and Chief Financial Officer

001 301 2794836

              
Media:

John Godfrey	Group Communications Director	0044 20 3124 2090
Richard King	Head of Media Relations	020 3124 2095

Financial Calendar 2012/2013	Date
Payment date of 2012 interim dividend	1 October 2012
Q3 Interim Management Statement 2012	1 November 2012
Preliminary Results 2012	6 March 2013

Forward looking statements

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.

 

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