L&G Climbs on Talks of Surplus
Murray, John, The Independent (London, England)
Shares in Legal and General leapt 18p to 477p yesterday after the insurer said it was in talks with the Department of Trade and Industry over a surplus in its long-term life insurance fund.
The announcement excited the market, because it follows a similar decision by the much smaller United Friendly insurance company to allocate pounds 275m of its investment funds to shareholders after talks with the DTI.
But L&G, which estimates the surplus in its life fund at more than pounds 2bn, insisted there would be no bonanza for shareholders. Tony Hobson, finance director, said: "We just want to explore the possibility of transferring funds on a more rational basis. We feel at the moment that the return we can give to shareholders is too closely linked to the bonuses we pay out to our with-profit policyholders and we would like more flexibility."
David Prosser, chief executive, said: "We're not talking about a bonanza for shareholders. We are not going to undermine the financial strength of the long-term fund." But he added that a change in the basis on which the funds are allocated between policyholders and shareholders would help to support a progressive dividend policy. …