Legal & General Group PLC (LSE:LGEN) moved to reassure investors that the recent wild swings in financial markets have not impacted on its business by stressing its annuity portfolio has not experienced any difficulty in meeting collateral calls and has not been forced sellers of gilts or bonds.
L&G is the only UK-listed insurer that offers liability-driven investment (LDI) solutions, which were at the centre of a crisis in financial markets, as the pension schemes that use these derivative schemes to help manage interest rate risks faced large margin calls and forced the Bank of England to step in.
In a trading update almost a week after the intervention, the FTSE 100-listed financial services group, which has around £1.3 trillion in assets under management, estimated its solvency coverage ratio at the end of September to be between 235-240%, up at least 23 percentage points from the half-year 2022 (212%).
This rise in the ration principally reflected the contribution from higher interest rates and strong ongoing operational surplus generation.
Group liquidity remained strong with around £2.3bn 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, the company stated.
All its businesses continue to generate high levels of cash, L&G said, adding ratings from Fitch (AA-), Moody's (Aa3) and S&P (AA-) remain strong and unchanged.
The group has maintained the positive momentum seen over the first half of the year and is continuing to deliver into the second half, despite the prevailing macro conditions, and L&G said it expects to deliver full-year operating profit growth in line with the first half (8%) with full-year capital generation of £1.8bn.
The expected interest rate increases will continue to have a positive impact on earnings per share and its solvency coverage ratio, L&G commented.
Sir Nigel Wilson, group chief executive, said: "Our businesses are resilient, and we are on track to deliver good growth in key financial metrics for full year 2022.”
“Our balance sheet and liquidity position remain strong, and our businesses are highly cash generative.”