June 16, 2020 / 10:47 AM / 19 days ago

UPDATE 1-Legal & General plans debt issue after 8% rise in assets since end-March

(Adds detail, background, share price)

LONDON, June 16 (Reuters) - British life insurer Legal & General is planning to issue debt to capitalise on favourable market conditions after seeing an 8% rise in assets under management in the past two months, it said on Tuesday.

L&G, one of the largest investors in the UK stock market, focuses on passive index-tracking funds which have become increasingly popular since the coronavirus outbreak.

The company said the unit had estimated assets under management of 1.23 trillion pounds ($1.56 trillion) at the end of May, compared with 1.14 trillion pounds at the end of March.

L&G expects its shareholder solvency ratio - a key measure of a firm’s capital strength - to be in the range of 162% to 167% at the half-year, lower than the 174% it had reported for the period to Feb. 28.

A level above 100% indicates an insurer has enough capital, though analysts tend to look for higher solvency levels.

Analysts and regulators have pointed to increased risks to insurers’ balance sheets from corporate debt downgrades and defaults due to the global economic crisis.

L&G said only 0.65% of the corporate bonds in its 77 billion pound annuity portfolio had been downgraded to junk status this year.

L&G’s shares were trading at 233.4 pence at 1011 GMT, up 2% but slightly underperforming the FTSE 100.

$1 = 0.7910 pounds Reporting by Tanishaa Nadkar in Bengaluru and Carolyn Cohn in London; Editing by Anil D'Silva and Jan Harvey

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