Legal & General is trying to reassure investors about the LDI deal

Insurer Legal & General has struggled to reassure investors about its financial health after its share price fell sharply amid the turmoil in bond markets following the announcement of Chancellor Kwasi Kwarteng’s “mini” budget.

The company said Tuesday it was on track to deliver earnings in line with the guidance it provided with its August half-year results. “Our businesses are resilient and we are on track to deliver good growth across key financial metrics for full year 2022,” said Chief Executive Officer Nigel Wilson.

Legal & General shares closed at 221.9 pence on Monday, 13 percent below the level before Kwarteng’s financial plan was released on September 23.

In the pension market turmoil that followed the statement, concerns grew about Legal & General’s own pensions business and its involvement in the liability-driven investment strategies employed by pension schemes. The company’s wealth management arm, LGIM, is one of the UK’s largest providers of LDI products.

The group tried to reassure investors on both fronts on Tuesday. “Despite volatile markets, the group’s bond portfolio has had no difficulty in meeting collateral requirements and we have not been forced into selling gilts or bonds,” L&G said in a statement.

Regarding LDI, it noted that the recent rate hikes had caused “challenges for LGIM’s pension fund clients and counterparties to its UK LDI (Liability Driven Investment) business,” but added that “LGIM acts as an intermediary between our LDI clients and market counterparties and therefore has no balance sheet risk”.

L&G said its solvency ratio – a measure of available capital relative to the minimum required – improved from 212 percent in the half-year to 235-240 percent at the end of September.

https://www.ft.com/content/a56e8df6-ab95-4bef-9322-49d79e0ffc63 Legal & General is trying to reassure investors about the LDI deal

Adam Bradshaw

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