Problems in life insurance sector could strike soon

Wed, 25 Mar 2009

According to Credit Suisse, turmoil could be brewing in the UK life insurance sector . Legal and General have cut their dividend with the aim of maintaining their capital ratio, prompting fears about life insurance companies in the UK.

According to Credit Suisse manager Graham Ashby, the move indicates that the life insurance sector could be being called to task following years of poor cashflow dynamics, unclear accounting and poor dividend records.

Ashby reportedly commented: "It is the first time that L&G have cut its dividend but the other major players in the sector have done so in past. You don't need to own the sector. I've had these concerns for quite a while and they are now coming home to roost. European life companies bought a lot of structured products. Due to their opaque accounting some issues are only coming out of the wood work now."
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