Stockwatch

The week's winners
Legal & General up 9.5%
AIG up 6.8%
BRIT up 5.3%

The week's losers
Aon down 34.6%
Royal & SunAlliance (R&SA) down 24.5%

A profit warning from Allianz, Aon's accounting difficulties and R&SA's dire performance helped split the pack in the insurance shares league table.

AXA, SCOR, Aegon and Skandia all managed to reveal positive figures and Zurich Financial Services made a few gains following its recent dive.

But Aon fell to a 52-week low of $13.30 on 8 August. And it looks as though it will continue to flounder, while the threat of having to restate its earnings hangs over it.

While Aon has been plummeting, rival Willis goes from strength to strength.

Based on current share prices (13 August) , it has stolen Aon's tiara for the world's second biggest insurance broker.

Current figures put Willis's‚ market capitalisation at about $4.8bn (£3.14bn), compared to Aon's $4.3bn (£2.81bn) with Marsh at $25bn (£16.3bn).

While the bears still rule, a new change in UK accounting rules will play nicely into insurers' hands.

Under a change in legislation passed last month, insurers will be able to offset the plunging values of equities against underwriting profits without needing to sell the shares.

Carmine Papa, a partner at insurance specialist accountancy Littlejohn Frazer, said that the new rules will tax insurers on the uplift they get on equities.

This is bad news in a bull market, but the change in legislation has played into the industry's hands under current bear market conditions.

Previously, any uplift in share values was taxed only when the stock was sold and falls in share values were only allowed to be written against the insurer's tax bill if the shares were sold.

Many insurers are trying to hang on to their portfolios in the hope of the market rising once again.

The new rules, which accountants can use ready for the next round of quarterly results, should help them do this.

Papa said: "On balance, the change has worked in insurers' favour now that they are making losses on equities."

Rumour of the week was that Marsh was in talks to buy Benfield Group - the owner of reinsurance broker Benfield Grieg.

But by Tuesday, Benfield issued a release scotching the rumour and due diligence being carried out.

Market sources expect Benfield Group to float when market conditions are right - although a trade sale could be an option. Watch this space.