L&G Leads Rebound in FTSE 100 Index as Capital Withstands Brexit

  • Shares climb as much as 10%, paring post-Brexit losses
  • L&G appoints the Treasury’s John Kingman as group chairman

Legal & General Group Plc led a rebound in the benchmark FTSE 100 Index after the British insurer showed that its capital buffers have withstood an initial fallout from the U.K.’s unexpected decision to leave the European Union.

The insurer gained as much 10 percent in London after losing more than 4 billion pounds ($5.3 billion) of its market value in the two days after Thursday’s vote on EU membership. The insurer reported Tuesday an estimated Solvency II ratio of 156 percent which is based on a capital surplus of 4.9 billion pounds and compares with 169 percent reported in March. The new figure also includes the impact from paying out its final dividend and an annuity deal with Aegon NV.

“Legals has issued a pretty robust statement in response to the market turmoil following the Brexit vote,” said Eamonn Flanagan, an analyst at Shore Capital in London. It “should provide at least stability to the share price, which has suffered considerably amidst the carnage of the financials of the recent few trading days.”

The company’s shares were up 8.2 percent at 178.6 pence at 10:37 a.m. in London, the biggest gain since May 2010.

New Chairman

L&G, which on Tuesday also announced the appointment of the U.K. Treasury’s John Kingman as chairman, had seen its shares slump 30 percent after Britain voters backed leaving the EU by 52 percent. That sent bond yields to record lows and raised concern about the value of the insurer’s fixed income investments. L&G said it runs an A minus rated credit portfolio of 44.8 billion pounds.

The insurer said its “central-planning scenario” before the vote was for a 50 percent chance for the U.K. to leave and that it had taken a number of actions to reduce risk in its funds, including reducing equity holdings. The company said it still expects to report a 15 percent increase in net cash at the half year.

Kingman was recently second permanent secretary of the Treasury and was also chief executive officer of U.K. Financial Investments Ltd. during the financial crisis. He replaces independent director Rudy Markham, who had served as interim chairman after John Stewart’s retirement from the board. The Prudential Regulation Authority and Financial Conduct Authority have approved the appointment.

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