Legal & General seeks $1.2bn

LONDON, England -- Legal & General, Britain's third-largest life insurer, plans to sell shares worth £786 million ($1.2 billion) to existing shareholders.

The company said on Tuesday it would use the proceeds to expand in a consolidating marketplace. Its stock (LGEN), which has fallen by a quarter over the last 12 months, fell 2 percent to 110.50 pence in early London trading on Tuesday.

Analysts expect many insurers may have to ask shareholders for more money to bolster flagging investment portfolios, which have been battered by slumping stock markets. Insurers typically hold vast amount of money in stocks to be used to meet claims.

Zurich Financial Services, Europe's third-largest insurer, only five days ago said it would raise as much as $2.5 billion through a stock sale to restore profitability. (Full story)

"We are issuing this rights issue from a position of strength,'' said Chief Executive David Prosser.

"We believe the trends in our marketplace will continue to favour the strong and efficient and that current stock market conditions reinforce this,'' Prosser said. "We...wish to increase our capital base and financial flexibility to ensure our potential for profitable market growth is not constrained.''

The company said it will offer 13 new shares for 50 existing shares at 60 pence each, a 47 percent discount to Monday's 112-3/4 pence close.

But some analysts have said Legal & General has a strong balance sheet compared with its peers such as Royal & Sun Alliance. They felt the only reason Legal & General might need cash would be to fund an acquisition, such as a fund management business or life assurance company, said Reuters.

British insurer Royal & Sun Alliance has said it would consider the possibility of a rights issue.

Legal & General said at the time of its first-half results in July that its capital position was resilient.