Outlook for Legal & General deteriorates: S&P

S&P Global Ratings said on July 7 that it reduced its outlook for UK-based life insurer Legal & General’s (L&G’s) subsidiaries as the group’s spending is outpacing retained earnings.

Over the past four years, L&G has significantly accelerated the growth of its investments and bulk annuity purchases while maintaining a high dividend payout ratio.

Such growth is outpacing that of retained earnings and ultimately weighs on L&G’s ability to maintain S&P capital adequacy at its 'AA' level.

As a result, S&P is revising the outlook on the group’s core and highly strategic subsidiaries to negative from stable. At the same time, the ratings agency is affirming the group’s 'AA-' ratings, reflecting L&G’s leading and highly profitable market positions. S&P may lower ist ratings if L&G fails to maintain projected S&P capital adequacy above ist 'AA' benchmark over the next 12-24 months.

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