Is it really going to be this bad?

Wednesday, Mar 25 2009 by
  • L&G, Britain's third-largest insurer, has announced that it made a a loss before tax of £1.38bn in 2008 on European embedded value basis , down from a profit of £1.71bn the year before. Losses were £1.49bn on an IFRS basis against an £883m profit last time. Gross written premiums rose to £5.9bn from £4.79bn in 2007.
  • Loss primarily caused by the turmoil in the stockmarkets - the FTSE 100 index fell by 25% during 2008 - but its capital position was also weakened by its decision to double its provision against losses on credit defaults to £1.2bn last month.
  • Chief executive Tim Breedon said that L&G was braced for a surge in bankrupcies - "Our bond portfolio is of high quality and well-diversified, but we have reflected heightened short-term risks by increasing provisions for non-profit annuity credit defaults to £1.2bn. This represents a historically high rate of provisioning, above levels needed to cover the worst default levels since the Great Depression."
  • Halving its final dividend to 2.05p per share in an effort to conserve cash... with the exception of technical adjustments following a 2002 rights issue, it is the first dividend cut by the 172-year-old company in living memory.

Steady on, Tim, is it really going to be this bad?



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Legal & General Group Plc is a holding company. The Company, together with its subsidiaries, transacts life assurance and long-term savings business, investment management and general insurance and health business. It operates through six segments: Legal & General Retirement (LGR), Legal & General Investment Management (LGIM), Legal & General Capital (LGC), Legal & General Insurance (LGI), Savings and General Insurance (GI). The Company operates its businesses in the United Kingdom, the United States and other countries across the world through its subsidiaries and associates. The Company offers products, including annuity contracts; longevity insurance contracts; lifetime mortgages; index fund management; active fixed income and liquidity management; solutions and liability driven investment (LDI); active equity; investment strategy and implementation; direct investments and structuring; pensions (individual and corporate); endowment policies, and participating contracts. more »

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4 Posts on this Thread show/hide all

Betasurfer 25th Mar '09 1 of 4

It does rather turn the spotlight on Aviva and the state of its own balance sheet given that it decided against cutting its dividend despite difficult trading conditions...

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MrT 25th Mar '09 2 of 4

Latest blog from Alphaville focuses on their decision to divulge further details on the internal CDOs -

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Gradders73 25th Mar '09 3 of 4

I worry about how much nastiness lurks in the shadows.  When Lloyds syndicates blew up in the 1980s was because they had churned the books and reinsured the risk several times, so the paid out losses to the system was much higher, though there were some winners.  I expect it will prove to be the same this time.  It's easy to forget that the amount of money pumped into the system is not far off the full size of the mortgage market, so why the never ending toxic assets?  I suspect the same risks have been packaged and churned so many times people don't know which way is up.  We'll have a combination of hutzpah from some players to embarrassed admissions from others, but it's going to take a long time to clear the rubbish out of the system.  The following article brings back memories.....

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Fangorn 14th Sep '10 4 of 4

Legal & General sees scope for dividend hikes - CFO

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