Last week, Prudential Regulation Authority chief executive Sam Woods wrote to UK insurers – reminding them to prioritise their obligations to policyholders when considering any profit distributions to shareholders at this particularly disruptive time.
“Through their provision of both general and life insurance products, insurers provide an essential safety net for individuals and businesses,” asserted Woods. “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.”
The CEO added that companies should remember that their boards, when coming up with such decisions, are expected to satisfy themselves that each distribution is both prudent and consistent with their risk appetite.
In response, Legal & General Plc said its board has given careful consideration to Woods’ message and that it intends to pay up while continuing to monitor coronavirus-related developments.
In a regulatory filing, the firm stated: “The board continues to pay close attention to the need to protect its customers and employees at this difficult time. 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.”
Offering assurances that the group’s solvency position remains robust – notwithstanding significant market volatility – Legal & General said the current intention of its board is to confirm its previous recommendation of a 12.64 pence final dividend for a full-year dividend of 17.57 pence.
Meanwhile the European Insurance and Occupational Pensions Authority on Thursday urged (re)insurers to temporarily suspend all discretionary dividend distributions and share buybacks amid the pandemic-induced uncertainty.
