Legal & General considers debt issue following an 8% growth in assets under management

Legal & General (LON: LGEN) said on Tuesday that its assets under management (AUM) saw an 8% growth in the past 2 months. To further benefit from the favourable market conditions, the British life insurer announced that it is now considering issuing debt. L&G sold its General Insurance business to Allianz Holdings for £242 million in 2019.

Shares of the company were reported about 4% up in premarket trading on Tuesday. At £23.70 per share, Legal & General is currently a little under 25% down year to date in the stock market after recovering from a low of £13.80 per share in March. Owing to the Coronavirus driven downward rally, the British multinational company has lost all of its gains that it posted in the stock market last year.

L&G estimates £1.23 trillion worth of assets under management

In London-listed stocks, L&G is widely known as one of the biggest investors. Its primary interest lies in passive index-tracking funds that due to the ongoing Coronavirus pandemic, have been sharply in demand in recent months. L&G launched a £6 million grant fund last week.

At the end of May, the financial services company estimated £1.23 trillion worth of assets under management. In the last week of March, its AUM were capped at a much lower £1.14 trillion. In its half-year financial results, Legal & General hopes to print its shareholder solvency ratio between 162% and 167%. In the six months that ended on 28^th February, L&G’s shareholder solvency ratio was recorded at 174%.

Shareholder solvency ratio is a widely used indicator that offers insight into a company’s capital strength. A ratio above 100% represents that the insurance firm has sufficient capital. Analysts, however, seek much higher solvency levels.

COVID-19 poses a threat to the balance sheets of the British insurers

Due to COVID-19 that has so for infected a little under 300,000 people in the United Kingdom and caused more than 41,500 deaths, experts now warn of a higher risk to the balance sheets of the British insurers ascribed to a significant rise in defaults and corporate debt downgrades. Learn more about the basics of a balance sheet.

So far in 2020, however, L&G said its annuity portfolio that is currently valued at £77 billion has only seen 0.65% of corporate bonds downgraded to junk.

At the time of writing, the London-headquartered financial services company has a market cap of £14.10 billion and a price to earnings ratio of 7.78.