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 £6 billion. These estimates do not include the proposed RT1 debt issuance, and assume unchanged market conditions to the end of June.

Our £76.9 billion annuity portfolio1 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 portfolio2.  

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 £3.2 billion2. 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 growing annuity portfolio £76.9bn4, which underpins our Institutional and Retail Retirement businesses, is a resilient source of profits and capital generation. In respect of new business:

- LGRI (our Institutional Retirement business) has transacted £2.8 billion of global Pension Risk Transfer (PRT) across 25 transactions to 5 June, and we expect a further £0.6 billion of PRT transactions during June. Additionally, LGRI is actively quoting on a further global PRT pipeline of more than £25 billion. 

- LGRR (our Retail Retirement business) delivered £337 million of annuity premiums to the end of May, down 17% year on year, and made £315 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 £11.2 billion to the end of May and total AUM is estimated at £1,233 billion. Over the period, external revenue increased 9% to £385 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 £1,240 million of total gross written premiums to the end of May, up 4% on the prior year. We continue to monitor mortality claims closely.



1As at 1 June 2020.
2As at 31 December 2019.
3We have experienced less than £300 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. 
4As at 1 June 2020.

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

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 £1.2 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 £13.7 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


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