US trust funds' demands prompt surprise cash calls
The future of SVB Holdings looked uncertain this week as its share price plummeted by nearly 21% following cash calls on three of its syndicates.
SVB finance director Philip Whittaker said: "I do not know that the future holds. We will attempt to restore shareholder value."
Last year the company's managing agency subsidiary, SVB Syndicates, managed five Lloyd's syndicates. Syndicates 1212 and 575 were merged into the others for the 2002 account year.
On Tuesday, syndicates 1007 and 1241 made cash calls for the 2000 and 2001 underwriting year. Syndicate 1212 also made a cash call for the 2001 year.
A statement to the stock market said the money was required to comply with new US trust fund requirements. Insurers must deposit 100% of their gross liabilities in the US by the end of next month.
Whittaker said SVB made the interim cash calls following advice from its actuaries.
"We were not anticipating deterioration to the extent that our actuaries alighted on," he said.
Before the announcement, the total capacity of all the syndicates was £474m. Of this, corporate members provided 86% but this amount has now dropped from £406m to £347m.
Following the statement, SVB's share price dropped by 9p to 32.5p.
Whittaker admitted net estimations of World Trade Centre losses could rise from £30m.
"We are working through the exercise to get from the gross to net position," he said. "It is possible that those numbers may change as that process works its way through."
Last year SVB was in talks with a potential purchaser who later withdrew. Whittaker declined to comment whether a new bidder had emerged but said "nothing has been ruled out".
He refused to comment whether the company was trading insolvently but added: "If that were the case that might be something that might be mentioned in the statement. It would be a matter of interest to shareholders."
