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LGA delivers further phase of capital programme

Legal and General’s US subsidiary L&G America (LGA) completed a further phase of its capital efficiency programme on 31 December 2012.

Through the use of a reinsurance solution, this phase improves LGA’s capital position and replaces the need for temporary financing, a total benefit of USD345m. As a result, L&G Group IGD surplus increases by GBP172m.

In total, the programme which started in 2010 has delivered USD735m of capital benefit for LGA and a total benefit to L&G Group IGD surplus of GBP402m. The company delivered these two further phases in 2012, ahead of the schedule indicated at the 2012 half year results.

The capital programme has supported LGA to grow its core term product over 11 consecutive quarters. Annual premiums written during Q3 2012 were up 31 per cent to USD38m APE (Q3 2011 USD29m) and gross premiums at Q3 YTD 2012 were up 11 per cent to USD677m (Q3 2011: USD611m). The more efficient capital structure has helped to increase the new business margin to 10.9 per cent (H1 2012) from 4.9 per cent in 2009.

Ordinary dividend remittances to L&G Group have grown from USDnil in 2009 to USD50m in 2010, USD55m in 2011 and USD60m 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.

Jimmy Atkins, president and chief executive of L&G America says: “This December 2012 transaction, as part of a series of related transactions over the last few years, further demonstrates how the US and UK parts of Legal & General work together for a single purpose. It demonstrates our ability to design and execute financial plans as needed to optimise capital across our legal entities, which in turn fuels our strong growth in the US.”

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