LONDON, Oct 4 (Reuters) - Legal & General Group said on Tuesday it would continue to support pension fund clients buffeted by sudden interest rate hikes but had not experienced difficulty in meeting collateral calls and has not been a forced seller of gilts or bonds.
In a trading update, the company said market volatility had increased significantly in the second half of the year, but this has had "limited economic impact" on its businesses and its expectations for full year operating profit of around 8% and capital generation of 1.8 billion pounds were unchanged.
"One of the strengths of the UK insurance regime is that we regularly monitor and stress our capital and liquidity requirements to a 1 in 200 stress level so that we can withstand shocks like we have seen in the past few days," L&G said.
Wild swings in UK government bond prices following a controversial government "mini-budget" on Sept. 23 put swathes of British pension schemes at risk, forcing some to dump assets to meet collateral demands from liability driven investment managers to shore up ailing derivatives positions.
The LDI funds, which help pension funds match their liabilities to their assets and the future payouts they must make to pension members, were themselves facing margin calls from their relationship-banks and other key financial players.
"We hold considerable buffers over these prudent requirements and have a wide array of tools available to manage collateral calls," it added.
The group estimates its solvency coverage ratio to be between 235-240%, up at least 23 percentage points as of Sept. 30 compared with the half-year 2022.
L&G said moves by the Bank of England to carry out temporary purchases of long dated gilts have helped to alleviate pressure on its clients but it would continue to work closely with them to achieve appropriate hedging levels.
Reporting By Sinead Cruise; editing by Dhara Ranasinghe and Karin Strohecker