L&G says balance sheet resilient, shares jump

* Solvency II ratio 156 pct, down 3 points

* Balance sheet hit at 200 mln pounds - source

* Sees (Shanghai: 600481.SS - news) strong cash generation, shares up 8 pct

By Simon Jessop

LONDON, June 28 (Reuters) - Legal & General (LSE: LGEN.L - news) 's balance sheet has proven resilient following Britain's decision to leave the EU partly because the British insurer trimmed its exposure to riskier assets before the vote, it said on Tuesday.

Shares (Berlin: DI6.BE - news) in insurers were among the hardest hit after the referendum result, with investors concerned crucial capital buffers would take a pounding from the slide in value of equities, credit and other assets.

Legal & General (L&G) said its solvency II capital ratio - a measure of how much extra money it has to act as a cushion should markets fall - was 156 percent at the close on Monday, down just 3 percentage points due to the market volatility.

Shares in L&G were up 8.7 percent at 0747 GMT, among the top gainers in a 2.2 percent stronger blue-chip FTSE 100, albeit still some 30 percent below their pre-vote level.

"In summary, a resilient trading statement, a robust balance and solvency position and a materially undervalued stock," said Shore Capital analyst Eamonn Flanagan, who has a "buy" recommendation on L&G stock.

A ratio of 100 percent means insurers have enough capital to cover underwriting, investment and operational risks, so anything above gives them more leeway to cope with any major market fallout.

A source close to L&G said the drop in the solvency ratio to 156 percent equated to a balance sheet hit of some 200 million pounds ($266.5 million).

The ratio was 169 percent at the end of 2015 but the insurer had already reduced that by about 10 percentage points after paying out cash in the form of a dividend and funding the purchase of rival Aegon (Swiss: AGN.SW - news) 's UK annuity portfolio this year.

"Overall, our Solvency II balance sheet has demonstrated its resilience to market volatility, including that caused to date by the EU Referendum outcome," the company said in a statement.

Ahead of the vote, L&G sold some sub-investment grade credit, reduced its exposure to European banks' subordinated debt and hedged some of its equity market exposure, it said.

The insurer said it expected group operational cash generation to climb about 5 percent in the first half to around 655 million pounds and net cash generation to rise some 15 percent to about 720 million pounds.

L&G said it had not taken any action as a result of the downgrade of UK's sovereign debt rating by Moody's, Standard & Poor's and Fitch as it had already treated the debt as AA (Other OTC: AATDF - news) rated in its Solvency II modelling.

($1 = 0.7504 pounds) (Additional reporting by Sinead Cruise; editing by David Clarke (Toronto: CKI.TO - news) )