Legal & General expects £10m impact from LDI pension fallout

The company said its revenues in its pensions arm decreased after it had to sell higher fee products in order “to meet collateral requests”.

It came after liability-driven investment (LDI) strategies in the pension market were shaken dramatically in the aftermath of the September mini-budget by Liz Truss’s former Government.

L&G, which is one of the biggest LDI investment managers in Britain, said overall profit targets for the year remain unchanged despite the impact.

It said its has benefited from a recent strong performance by its pension risk transfer division.

The company also welcomed the Chancellor’s plans to reform Solvency II, referring to the multi-trillion pound insurance sector, which will ease capital rules for the industry.

L&G said in a statement: “We believe the proposals, as outlined in the corresponding policy document, represent positive progress and will allow us greater flexibility to make appropriate investments, including ones which: develop new infrastructure, contribute to the UK Government’s levelling-up agenda, and support positive climate outcomes.

“We welcome the inclusion of these reforms as part of the Government’s reform programme to financial services regulation, through the Financial Services and Markets Bill process, which we anticipate will be during the first half of 2023.”

The firm told shareholders in a statement issued on Friday morning that it expects its percentage of UK-based assets backing its UK annuity portfolio to increase once reforms are implemented. The firm can trace its roots back to 1836, when it was founded by six lawyers. It continued to grow during the early 20th century, and first entered the US market in the 1940s, acquiring the pensions business of Metropolitan Life Insurance Company of New York,

Shares in the insurer were 2.6 per cent higher at 260.3p in early trading on Friday.