with Michael Faulkner
There were mixed fortunes for insurance stocks this week as the financial markets took a further battering and confidence levels plunged to new lows. Although the FTSE 100 posted its biggest ever points fall on Monday and its largest percentage fall since Black Monday in October 1987, some insurance stocks managed to post a rise overall for the week.
Lloyd’s insurer Chaucer Holdings, whose share price has fallen by nearly 50% in the past six months, was the biggest riser among the insurance stocks, up more than 6% during the week. Chaucer’s stock was 58.75p as Insurance Times went to press.
Broking giant JLT also enjoyed a bounce, its stock rising 5.5% this week. JLT’s share price has been rising over the past six months, reaching a 52-week high of 470.75p earlier in the week. JLT shares were trading at 466.5p as Insurance Times went to press.
Other insurance stocks to record a rise this week included Highway (up 3.56%), Novae (2.33%) and Hiscox (1.74%).
The worst performing insurance stocks were insurance giants Aviva and RSA. Aviva shares plunged 14% during the week and the listed insurers Amlin, Beazley and Admiral also reported falls this week. AIM-listed Lancashire, Omega and Leo Insurance Service also dropped.
In the banking sector, Royal Bank of Scotland shares plunged as investors worried about its exposure to toxic debt. As Insurance Times went to press, RBS’s share price had plunged more than 32%, falling to its lowest level for more than 10 years There were also concerns that its auction of assets would fail to raise the £4bn that it needs to boost its capital. RBS has been trying to sell its insurance arm for some time, but potential buyers have been thin on the ground. The bank has put a £7bn price tag on its insurance businesses that included Direct Line and Churchill. Only US insurer Allstate is believed to have made an offer for the business, which was below the asking price. But other insurers dropped out of the process.
RBS chief executive Sir Fred Goodwin has been adamant that he wants to achieve the full price for the insurance arm. In the current circumstances, will he be forced to change his stance? If so, will anyone be able to raise the cash necessary for a bid?