UK insurance giant to cut 10% of workforce
British insurance giant Legal & General said today around 10% of its life and pensions workforce would go this year after it reported a £1.5bn (€1.6bn) annual loss.
L&G said the UK job cuts - out of a 6,500-strong division - would mirror similar levels last year, when it cut its headcount by 10%.
It said the figure included 450 job losses announced last month.
L&G is cutting costs as it battles against the recession and stock market turmoil, which sent it diving into the red last year with pre-tax losses of £1.5bn (€1.6bn).
It made profits of £883m (€952.85m) in 2007, although the 2008 figure was impacted by £1.2bn (€1.3bn) in provisions to cover potential credit defaults.
L&G said job cuts would largely be made across central functions, such as finance, human resources and risk compliance.
It has four main offices in Surrey, Hove, Cardiff and London.
L&G is one of a number of life and pensions firms cutting costs as the financial crisis takes its toll.
Standard Life also announced earlier this month that staff numbers were being trimmed as it ramped up savings targets by another £75m (€80.9m).
Sales and profits across the sector are being hit by sharp equity market declines.
L&G also announced it would cut its dividend payout to shareholders for the first time "in living memory" to preserve cash amid the stock market falls.
It has increased reserves to deal with the possibility of a crisis comparable to that of the Great Depression.
L&G said its capital buffer - required by regulators to ensure its balance sheet can cover over and above liabilities - currently stands at £1.5bn (€1.6bn) after the final dividend payment.
However, the surplus has reduced by more than £1bn (€1.1bn) since the end of last September, knocked by further equity falls and provisioning in other areas.
L&G said operating profits on a European embedded value basis - the standard industry measure - rose to £870m (€938.2m) in 2008 from £848m (€914.5m) the year before.
But this was also far lower than expected in the market.
It will now focus new business efforts on products with lower start-up costs, such as DIY pension products, so-called self-invested personal pensions (SIPPs), rather than cost-intensive stakeholder pensions.
Tim Breedon, group chief executive of L&G, said: "We expect difficult economic and market conditions to continue.
"Going forward through 2009 we are taking a prudent approach to new business - ensuring that we balance our appetite with cashflow growth and balance sheet consolidation.
"We will be increasingly selective of the new business we write - targeting products with low capital strain, shorter payback periods and less risk to capital."
Shares in L&G dropped 3.5% after the annual results.
