Legal & General Shares Jump As Firm Aims to Reassure Investors Amid Market Turmoil

By Scott Kanowsky 

Investing.com -- Shares in Legal&General Group PLC (LON:LGEN) rose on Tuesday after the insurer looked to assuage investor concerns about its financial status following market volatility last week in the wake of U.K. chancellor Kwasi Kwarteng's so-called "mini-Budget."

The firm said it was working to "achieve appropriate hedging levels" in the portfolios of its asset management unit's U.K. liability-driven investment business, which allows pension funds in particular to plan out payouts to meet future cash needs.

The popular strategy has faced recent pressure due to a surge in the yields of U.K. government bonds, or gilts, after Kwarteng unveiled his proposal to slash taxes for top earners. That spike subsequently caused thousands of pensions plans to sell even more assets in order to meet cash calls on their LDI contracts.

With the spiraling sell-off threatening to spark a total meltdown in U.K. financial markets, the Bank of England stepped in to carry out purchases of long-dated gilts in an attempt to restore stability. Legal&General credited the BoE with helping to "alleviate the pressure on our clients."

The company added that, because it acts as a go-between for pension funds and their market counterparties, it has "no balance sheet exposure" to the market turmoil.

Meanwhile, Legal&General announced in a trading update that it expects to report full-year operating profit in line with the 8% growth it delivered in the first six months of its fiscal year. Annual capital generation is also seen at 1.8 billion pounds ($2.05 billion), while interest rate rises are anticipated to have a positive effect on earnings per share and its solvency coverage ratio.

"Our balance sheet and liquidity position remain strong, and our businesses are highly cash generative," said Legal&General group chief executive officer Nigel Wilson in a statement.