Daily Insurance Industry News
Daily Insurance Industry News
Friday 22nd of February 2019
February 17, 2009

L&G increases capital reserves to reassure market

by Gill Montia

Story link: L&G increases capital reserves to reassure market

Legal & General (L&G) has announced that it is increasing its capital cushion by £650 million, to £1.2 billion.

The move follows yesterday’s sharp fall in the insurers share price on concerns that the group needed an extra £1.9 billion to cover potential losses on its corporate bond portfolio.

The company has today stated: “The planned additional reserves, which are before tax, follow a thorough sector-by-sector review of our portfolio, and default experiences from the 1930s and subsequent recessions.”

L&G has also confirmed that it has been speaking to the Financial Services Authority about its capital position.

In December, the regulator began stress-testing the balance sheets of life insurers to ensure they could withstand market shocks, including further declines in the equity markets.

Efforts to avoid the UK insurance sector become infected with problems of capital raising seen in the banking sector continued in January, when the Association of British Insurers (ABI) issued new guidelines on rights issues.

The new regime includes changes to shareholder approval of rights issues. A vote is now only required if a company is increasing share capital by more than two-thirds, rather than one-third.

The Association said the measures are intended to speed up the rights issue process during a period when borrowing remains both restricted and expensive.


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