The firm, whose shares fell 10 per cent to 44.5p this morning but by 12.30pm had increased to 46.5p,a 6 per cent fall, is reportedly looking at increasing the amount of money it puts aside for defaults when it publishes its results in March.
L&G is understood to assume a 2 per cent bond default risk on its £18bn corporate bond portfolio while firms such as Prudential assume a more conservative 18 per cent.
As such, concerns were raised after the FSA called for life offices to stress-test their capital against a further 20 per cent fall in equity and bond markets.
It has been suggested L&G would not meet solvency requirements if this were the case and could be forced to make a cash call to fill the estimated £3bn gap or potentially cut dividends.
But L&G said in a market alert this morning that it has had no conversations with FSA “beyond the usual year-end process”.
Corporate bond spreads widened significantly between September and January due to an increase in the perceived risk of default, illiquidity in the market and deleveraging from hedge funds and other financial institutions.