* Rivals say they will continue their ABI membership
* Decision follows merger of ABI unit with IMA
* L&G says large part of business falls outside ABI remit (Adds comment by analyst, background)
By Nishant Kumar
LONDON, Aug 13 (Reuters) - Legal & General Group Plc will quit the Association of British Insurers (ABI) bythe year-end, it said on Wednesday, dealing a blow to the tradebody at a time of rapid regulatory changes in the UK financialservices sector.
Legal & General's decision follows changes in the mandate ofthe ABI as a result of the merger with the separate InvestmentManagement Association trade body of the ABI's InvestmentAffairs division, which includes its service advising members onhow to vote at company meetings.
While rivals such as Prudential, Aviva andStandard Life said they will not follow the path taken byLegal & General, analysts said the decision reflects thediminishing role played by ABI for insurers with largeinvestment management units, even though it has nearly 300members, accounting for 90 percent of the UK insurance market.
"It feels like a bit of pivotal moment now," said TomMcPhail, head of pensions research at Hargreaves Lansdown.
"The ABI had been under particular pressures in terms of itsmembership and its ability to present a consensus view on behalfof its members," he added.
The active investment management industry is, increasingly,not managed within insurers, making the IMA, which is to berenamed the Investment Association from the beginning of nextyear, more suitable for players like Legal & General whichgenerated roughly a fifth of its operating profit in the firsthalf of 2014 from its investment management arm.
The company said its engagement with government, regulatorsand others will be more individually tailored in future, andless suited to uniform representation through one trade body andthe ABI tends to concentrate on the general insurance sector,where Legal & General has only limited business.
"A large proportion of our business lines will fall outsideof the remit of the ABI given that the business of Legal &General has significantly evolved and in 2014 our business isnow as much investment management as insurance," Legal &General's chief executive Nigel Wilson said in a statement onWednesday.
ABI's director general, Otto Thoresen, said that the tradebody was "disappointed" by Legal & General's departure from theorganisation.
"However the ABI's continuing strong membership representsover 90 percent of the insurance sector," he said in astatement.
"The great advantage of the ABI is that our members worktogether across the usual corporate boundaries to tackle issuesthat are important to consumers and to deliver an agenda forreform. The Board of the ABI believes the industry is at itsmost effective when working together to respond to legislativeand regulatory change." (Additional reporting by Richa Naidu; Editing by EricaBillingham and Greg Mahlich)