Legal & General updates market on bond portfolio

As it looked to assuage investors’ fears over its bond portfolio, insurer and investment manager Legal & General updated the market with details of its annuity bond portfolio on Tuesday.

L&G said that as at the end of December, the bond portfolio backing its annuity business amounted to around £39bn, compared to £40.7bn in 2015.

Meanwhile, 4.4% of the bond portfolio in its retirement business was rated AAA, 28% was rated AA, 33.4% was rated A, and 31% was rated BBB. 3.2% of the portfolio was rated BB or below.

In terms of sectors, around 15% of the annuity bond portfolio related to sovereigns, supras, sub-sovereigns, 4.3% to banks, 1.9% to financial services, 1.7% to insurance, 11.5% to utilities, 11.6% to consumer services and goods & healthcare and 6.7% to technology and telecoms.

Around 9.9% was related to industrials and oil & gas, 4.8% to property, 28.6% to securitisations & debentures, 1% to asset-backed securities and 2.7% to collateralised debt obligations.

Shore Capital said: “These figures do not vary greatly compared to the end of 2014, with the extra detail offered being the breakdown of the ‘industrials’ line to separate ‘oil & gas’ and ‘basic resources’.

“Not only are these figures low, around 5% and 1% respectively, we believe them to be of strong quality. This disclosure should nail concerns in the market over this exposure.”

Nomura, which rates the stock at ‘buy’, said: “We expect greater detail on the credit portfolio should allay market concerns on energy credit exposure. We still expect FY results on 15 March to be a positive catalyst.”

Legal & General is due to releases its 2015 earnings on 15 March, when it will also report its Solvency II capital position.

At 1010 GMT, L&G shares were 2.3% higher to 207.70p.