Business Express is an online portal that covers the latest developments in the world of business and finance. From startups and entrepreneurship to mergers and acquisitions, Business Express provides reporting on the stories that matter most to business leaders and decision-makers.The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

L&G says not a forced seller of UK government bonds

By Sinead Cruise

LONDON (Reuters) -Legal & General Group has not been a forced seller of gilts, the insurer said in an unscheduled trading statement on Tuesday, quelling investor unease after sudden yield spikes sparked a dash for cash by some pension fund clients.

Wild swings in UK government bond prices following a “mini-budget” on Sept. 23 put British pension schemes at risk, forcing some to sell assets to meet collateral demands to shore up derivatives positions.

L&G shares, which had fallen by around 13% between Sept. 23 and Tuesday’s statement, surged 5.5% in afternoon trading.

The company, which runs one of Britain’s largest liability-driven investment businesses, said market volatility had increased significantly in the second half of the year but this had “limited economic impact” on its businesses and it had not experienced difficulty in meeting collateral calls.

LDI funds, which help pension funds match their liabilities to their assets and the future payouts they must make to pension members, were demanding collateral as they in turn faced margin calls.

“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,” L&G said.

Don't miss out on any breaking news or insightful opinions!
Subscribe to our free newsletter and stay updated on the go!

By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email.

“We hold considerable buffers over these prudent requirements and have a wide array of tools available to manage collateral calls,” it added.

The group estimates its solvency coverage ratio, a measure of financial resilience, to be between 235%-240%, up at least 23 percentage points as of Sept. 30 compared with the half-year 2022.

L&G said the Bank of England’s temporary purchases of long dated gilts have helped to alleviate pressure on its clients but it would continue to work closely with them to achieve appropriate hedging levels.

L&G said expectations for full-year operating profit of around 8% and capital generation of 1.8 billion pounds were unchanged, although some analysts were concerned that the group might suffer in future.

“Clearly there is also a negative AUM/revenue impact from lower bond prices,” analysts at RBC Europe said in a note to clients.

“There are now also questions arising over the risk management and governance processes around LDI more generally, both with pension schemes and asset managers.”

(Reporting By Sinead Cruise; editing by Dhara Ranasinghe, Karin Strohecker, Barbara Lewis, Bernadette Baum)

Recent Post: