Legal & General has denied it needs to raise fresh capital from investors, nor will it cut its dividend, following funding rumours which knocked its share price yesterday.
After reports of secret talks with the FSA over its capital position, Legal & General has today issued a series of statements to the Stock Exchange to reassure investors.
The firm says it is strengthening its capital reserves to help it deal with increased defaults due to the recession, but has denied it is in any financial difficulty.
At the end of 2008, L&G held a capital surplus of over £1.6bn, but claims it would be prudent to raise its credit default reserves over the next four years.
Credit default assumptions will rise from a long-term average of 30 basis points per annum to 130 basis points per annum until 2013, roughly doubling annuity portfolio reserves to £1.2bn. L&G says it has studied the effects of past recessions going back to the 1930s to arrive at this figure.
The firm confirmed it has worked with the FSA and informed them of its decision.
L&G says it does not need to issue new shares to raise fresh capital and will not be cutting its dividend to shore up its reserves.
The company's shares rose 3.84% to 46p in early trading following the announcements.
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]IFAonline
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