Statement re IGD Capital Surp

RNS Number : 4161N

Legal & General Group Plc

17 February 2009

 



Stock Exchange Release
17 February 2009

Legal & General Group Plc: IGD Capital surplus as at 31 Dec 2008 is in excess of £1.6bn, even after more than doubling credit default reserves to £1.2bn.

In the light of market speculation about the strength of Legal & General's capital and cash positions, the Company is now issuing clarification on capital strength and reserving.

Capital Strength
As at December 31st 2008, we estimate our IGD* capital surplus was in excess of £1.6bn. 

This reflects falls in equity markets to 31st December 2008, the credit default reserving detailed below, and our current view of other year-end adjustments (an assessment of which is ongoing), but is before accrual of the final dividend.

Credit Default Reserving
In 2008 Legal & General's default experience was broadly in line with long term assumptions. However, in the light of the current economic environment, the Company believes it is appropriate to reserve on a more prudent basis. As part of its year-end process, Legal & General has therefore decided it is appropriate to take additional reserves against the anticipated risk of a short term rise in credit defaults.

The planned additional reserves, which are before tax, follow a thorough sector-by-sector review of our portfolio, and default experiences from the 1930s and subsequent recessions. On the basis of this analysis, we have decided to increase credit default assumptions for the next four years from our long term assumption of 30bps per annum for corporate bonds to approximately 130bps per annum, again before tax. This is equivalent to a further £650m (before tax) in credit default reserves, taking total reserves for defaults in our annuity portfolio to £1.2bn. 

In our judgement these increased reserves are both prudent and appropriate to cover all reasonably foreseeable circumstances.  We have worked closely with the Financial Services Authority and have kept them fully informed of our approach. 

* EU Insurance Groups Directive. Unaudited, management estimate

Enquiries
Investors:
Jonathan Maddock	Head of Investor Relations	020 3124 2150
Damian O'Reilly	Investor Relations Manager	020 3124 2151
Ching-Yee Chan	Investor Relations Co-ordinator	020 3124 2345
Media:
John Godfrey	Group Communications Director	020 3124 2090
Richard King	Head of Media Relations	020 3124 2095
James Bradley	Tulchan Communications	020 7353 4200
Mal Patel	Tulchan Communications	020 7353 4200

Notes

- Issued share capital at 31 December 2008 was 5,861,627,994 shares of 2.5p.  

- A copy of this announcement can be found in the News Releases section of our shareholder web site  at http://www.legalandgeneralgroup.com/investors/releases.cfm.

- There will be a live conference call with a Q&A session at 7.30am (GMT). UK and overseas investors should dial [phone].  The conference ID number is 86326230.

Financial calendar:

2008 Preliminary results	25 March 2009
Q1 2009 Interim management statement	23 April 2009
Half year 2009 results	4 August 2009

Forward-looking statements

This document may contain certain forward-looking statements with respect to certain of Legal & General Group Plc's plans and its current goals and expectations relating to future financial condition, performance and results. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Legal & General Group Plc's control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition and the policies and actions of governmental and regulatory authorities and the timing impact and other uncertainties of future acquisition or combinations within relevant industries. As a result, Legal & General Group Plc's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in Legal & General Group Plc's forward-looking statements. Legal & General Group Plc does not undertake to update forward-looking statements contained in this document or any other forward-looking statement it may make.

 

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