Legal & General moves to reassure investors over LDI business

Insurer Legal & General has moved to reassure investors over its financial health after its share price fell heavily during the bond market turmoil that followed the announcement of Chancellor Kwasi Kwarteng’s “mini” Budget.

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

Legal & General’s shares closed at 221.9p on Monday, 13 per cent below the level before Kwarteng’s fiscal plan was unveiled on September 23.

In the bond market ructions that followed the statement, concerns grew about Legal & General’s own annuity business and about its exposure to the liability driven investment strategies used by pension schemes. The company’s asset management division, LGIM, is one of the UK’s biggest providers of LDI products.

The group on Tuesday sought to reassure investors on both fronts. “Despite volatile markets, the group’s annuity portfolio has not experienced any difficulty in meeting collateral calls and we have not been forced sellers of gilts or bonds,” L&G said in a statement.

On LDI, it noted that the recent increases in interest rates had caused “challenges for the pension fund clients and counterparties of LGIM’s UK LDI (liability driven investment) business” but added that “LGIM acts as an agent between our LDI clients and market counterparties and therefore has no balance sheet exposure”.

L&G said that its solvency ratio — a measure of capital available as a proportion of the minimum required — had improved from 212 per cent at the half-year stage to between 235 and 240 per cent at the end of September.

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