Legal & General, one of the UK’s biggest pensions and insurance firms, sought to reassure investors, days after pension fund customers were hit hard by rising interest rates. interest rates and market volatility.
In a trading update to the stock market, the company said that market volatility had increased significantly in the second half of the year, but that it had no trouble meeting its benchmark calls and that it had not ability to buy bonds with the British government. debt, also known as gilts.
L&G said it was working with its customers after “extreme interest rates” had risen at an “unprecedented pace”.
Legal & General was one of the first pension fund managers to issue an assurance call to its pension fund clients two days after the Chancellor’s small budget, which sent the market into shock, falling sharply to a record down and beat the British government bonds. As asset prices fall – including UK government bonds or shillings – more bonds are required to pay pension fund liabilities, prompting money to be released assets and raising funds in a short period of time.
After L&G’s move, news spread across the markets about problems with the use of private equity products offered by investment banks to pension funds that were trying to manage or solve their problems. Products known as liability-linked investments, or LDIs, help limit liabilities and risks to pension fund books.
This led to the sale of pension funds. This was prevented by a £65bn emergency intervention by the Bank of England, which helped calm the market.
L&G said the Bank’s action has reduced interest rates, reducing pressure on its customers.
The company said it has “no balance sheet advertising” to LDIs, as it acts as an agent between its customers and other partners in the market.
Sir Nigel Wilson, Group Head of Legal & General, said: “Our financial and financial position remains strong and our business is very profitable. We will continue to work with our clients to support them in this period of increasing market.
L&G also said it had “significant reserves” in terms of capital and cash flow, which could “prevent shocks like we’ve seen in the past few days”. It said there are “a number of tools available to manage redundant calls”.
The company said the current market environment had a “minor economic impact” on its business, and its expectations for full-year operating profit of 8% and capital formation of £1.8bn were not met. different.
Shares in Legal & General rose as much as 5% on Tuesday morning, but remained around 10% below levels before Kwarteng’s low-budget filing on 23 September.