TIDMLGEN
RNS Number : 6385B
Legal & General Group Plc
04 October 2022
Legal & General: Continued positive momentum and a robust
balance sheet despite market volatility
Legal & General Group Plc ("Legal & General" or the
"Group") has maintained the positive momentum seen over the first
half of the year and is continuing to deliver into H2, despite the
prevailing macro conditions. Volatility has increased significantly
in H2, but this has limited economic impact on our businesses.
Update on LGIM's UK LDI business
Recent extraordinary increases in interest rates, and the
unprecedented speed of those increases, have caused challenges for
the pension fund clients and counterparties of LGIM's UK LDI
(Liability Driven Investment) business.
The Bank of England announced last Wednesday its intention, in
line with its financial stability objectives, to carry out
purchases of long dated gilts in a temporary and targeted way to
restore orderly market conditions. Interest rates have reduced as a
result.
These steps have helped to alleviate the pressure on our
clients. We are continuing to work closely with them to achieve
appropriate hedging levels in their portfolios. LGIM acts as an
agent between our LDI clients and market counterparties and
therefore has no balance sheet exposure.
Legal & General's Annuity Portfolio
The Group's annuity portfolio continues to perform well and
demand for global PRT is accelerating.
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. One of the strengths of
the UK insurance regime is that we regularly monitor and stress our
capital and liquidity requirements to a 1 in 200 stress level so
that we can withstand shocks like we have seen in the past few
days. We hold considerable buffers over these prudent requirements
and have a wide array of tools available to manage collateral calls
- for example, being able to post a variety of different types of
assets, or assets in different currencies, as collateral.
Demand for global PRT continues to increase, with funding
deficits reducing because of rising interest rates and widening
credit spreads. LGRI (Legal & General Retirement Institutional)
has transacted or is in exclusive negotiations with a further
GBP1.3bn of PRT since H1, including two transactions signed last
week, taking the total written year to date to GBP5.8bn. The global
pipeline for the remainder of 2022 and into 2023 is the busiest we
have ever seen, and we are on track to deliver another strong
result this year.
Volumes continue to be written at margins and capital strain in
line with our long-term average, and we expect the UK annuity
portfolio to be self-sustaining again in 2022.
International growth
We have a strong PRT pipeline in the US and Canada. We have
started to source two new areas of Direct Investment in the US to
support that pipeline, and we are further building out our US
Alternative asset origination capabilities via Ancora L&G,
LGC's first US investment, which is focused on developing life
science and technology assets alongside anchor institutions. The
partnership with Ancora is progressing well and we expect to
announce details of our first two schemes shortly.
Solvency, Leverage and Liquidity
The Group estimates its Solvency coverage ratio as at 30
September 2022 to be between 235-240%, up at least 23 percentage
points from HY 2022 (212%), principally reflecting the contribution
from higher interest rates and strong ongoing operational surplus
generation, and after paying the 2022 interim dividend.
Group liquidity remains strong with cGBP2.3bn of available cash
across the Treasury and the LGC Traded portfolio and is in addition
to the large amount of cash and gilts held by the annuity portfolio
. All our businesses continue to generate high levels of cash. IFRS
and Solvency II leverage ratios continue to reduce as the balance
sheet grows. Ratings from Fitch (AA-), Moody's (Aa3) and S&P
(AA-) remain strong and unchanged [1] .
Expectations for FY22 operating profit and capital generation
unchanged
In line with the guidance provided at HY, we expect to deliver
FY operating profit growth in line with the growth delivered in H1
(8%) and FY capital generation of GBP1.8bn. We expect interest rate
increases to continue to have a positive impact on our earnings per
share and on our solvency coverage ratio.
Sir Nigel Wilson, Group Chief Executive, Legal & General
said:
"Our businesses are resilient, and we are on track to deliver
good growth in key financial metrics for FY 2022. Rising interest
rates are having a positive impact on demand for PRT, and on our
EPS and solvency coverage ratio. Our balance sheet and liquidity
position remain strong, and our businesses are highly cash
generative. We continue to work closely with our customers to
support them through this period of increased market
volatility."
Notes to editors
About Legal & General
Established in 1836, Legal & General is one of the UK's
leading financial services groups and a major global investor, with
around GBP1.3 trillion in total assets under management (as at H1
2022) of which a third is international. We also provide powerful
asset origination capabilities. Together, these underpin our
leading retirement and protection solutions: we are a leading
international player in pension risk transfer, in UK and US life
insurance, and in UK workplace pensions and retirement income.
Through inclusive capitalism, we aim to build a better society by
investing in long-term assets that benefit everyone. As at 3
October 2022, Legal & General has a market capitalisation of
GBP13.3 billion.
Forward looking statements
This announcement may contain certain forward-looking statements
relating to Legal & General, its plans and its current goals
and expectations relating to future financial condition,
performance and results. By their nature, forward-looking
statements involve uncertainty because they relate to future events
and circumstances which are beyond Legal & General's control,
including, among others, UK domestic and global economic and
business conditions, market-related risks such as fluctuations in
interest rates and exchange rates, the policies and actions of
regulatory and Governmental authorities, the impact of competition,
the timing impact of these events and other uncertainties of future
acquisitions or combinations within relevant industries. As a
result, Legal & General's actual future condition, performance
and results may differ materially from the plans, goals and
expectations set out in these forward-looking statements and
persons reading this announcement should not place reliance on
forward-looking statements. These forward-looking statements are
made only as at the date on which such statements are made and
Legal & General does not undertake to update forward-looking
statements contained in this announcement or any other
forward-looking statement it may make.
Further information
Investors:
Edward Houghton Group Strategy and Investor Relations Director
+44 (0)203 124 2091
Nim Ilankovan Investor Relations Director +44 (0)203 124
2054
Blake Carr Investor Relations Director +1 240 397 0053
Media:
Graeme Wilson Tulchan Communications +44 (0)207 353 4200
[1] Ratings shown are Legal and General Assurance Society (LGAS)
Limited financial strength rating
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