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L&G doubles default reserves to £1.2bn

Legal & General has more than doubled its credit default reserves to £1.2bn but refuses to rule out a dividend cut in response to market concerns.

The move, revealed this week, comes in response to worries that L&G may struggle to meet capital requirements if it stress-tests assets against a further 20 per cent fall in equity and bond markets, something that the FSA is reported to have ordered.

L&G is to raise its default assumptions for corporate bonds for the next four years from 30bps a year to around 130bps a year. Its surplus capital stands at over £1.6bn.

Chief executive Tim Breedon quashed the possibility of an imminent cash call, saying during a conference call on Tuesday: “We have no plans whatsoever at this stage to raise capital.”

But a cut to dividends was not ruled out. Breedon said: “The board has not met to discuss the dividend. We are not making a dividend forecast in any way.”


Rose-tinted statistics

Certain statistics have been released recently that may lead some to believe the economic situation is getting better. The Halifax house price index recorded a 1.9 per cent increase last month while retail sales showed a big tick up. Unfortunately, I am convinced that both are just blips.

Mark Page: why my biggest overweight stock is a discount Spanish retailer

Artemis European Opportunities Fund manager Mark Page is questioned about the merits of investing in Spanish supermarket group, Dia. Dia is a 7,000-store Spanish discount supermarket chain. But with cheaper food prices coming on to the market and an improving Spanish economy, journalist Alexis Xydias questions Mark about its inclusion in the Artemis European Opportunities […]


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