Legal & General says it still intends to pay dividend
By Michele Maatouk
Date: Friday 03 Apr 2020
(Sharecast News) - Legal & General said on Friday that it will pay a final dividend for 2019 despite a warning from the Bank of England.
Shares in the insurer ended the session 10% lower amid expectations the sector will follow in the path of banks and suspend dividends to better weather the Covid-19 outbreak following advice from the BoE's supervisory division, the Prudential Regulation Authority. Aviva and Prudential shares were also under pressure.
L&G said it had given "careful consideration" to the PRA's letter of 31 March.
"The board continues to pay close attention to the need to protect its customers and employees at this difficult time," it said.
"The board has carefully considered the need to act prudently in maintaining safety and soundness, and in so doing ensure that Legal & General plays its full part in supporting the real economy. It also recognises the importance of dividend income to many institutional and retail shareholders, particularly in the current environment.
"The board observes that, notwithstanding significant market volatility, the group's solvency position remains robust."
L&G said it plans to confirm its previous recommendation for a final dividend of 12.64p, giving a full year dividend of 17.57p for 2019.
Earlier in the week, PRA chief Sam Woods wrote to the chief executives of insurance companies asking them to be "prudent" with dividends and bonuses.
"When UK insurers' boards are considering any distributions to shareholders or making decisions on variable remuneration, we expect them to pay close attention to the need to protect policyholders and maintain safety and soundness, and in so doing to ensure that their firm can play its full part in supporting the real economy throughout the economic disruption arising from Covid-19," he wrote.
"Through their provision of both general and life insurance products, insurers provide an essential safety net for individuals and businesses. They also have an important role as long-term investors in the UK economy. In the current situation of high uncertainty, it is therefore critical that insurers manage their financial resources prudently in order both to ensure that they are able to meet the commitments they have made to policyholders in a way that is consistent with the expectations of the Financial Conduct Authority, and to enable them to continue to invest in the economy."
On Thursday, the European Insurance and Occupational Pensions Authority urged insurers to temporarily suspend dividends and share buybacks amid the pandemic.
Earlier in the week, Britain's biggest banks agreed to suspend dividend payments in response to a request from the Prudential Regulation Authority.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN