IT WAS not a fun day for investors heavily exposed to the UK insurance sector yesterday as all the major players found themselves heading sharply lower. A surprise profit warning from Swiss Life was to blame which rattled sentiment towards the sector. Hence Royal & SunAlliance lost 14.75p to 319p, Prudential retreated 31p to 716p and Legal & General fell 3.5p to 154.5p.
Swiss Life warned full-year profits would be below expectations due to the dramatic fall in equity markets and low interest rates. It said that the guaranteed interest rate of 4 per cent for life insurance products in the Swiss group is having a considerable adverse impact on the company's financial performance in the low interest rate environment. Analysts, however, were quick to note that the guaranteed interest rate issue which was affecting the Swiss group was very much specific to insurers operating in that country.
BSkyB dropped 28p to 642p amid rumours that Goldman Sachs was looking to complete a substantial placing of shares. The last time the US broker was involved in a placing of BSkyB shares it placed some 150 million shares owned by the French media giant Vivendi Universal. Sector peers were generally in retreat as Pearson dropped 38p to 780p, Reed International fell 11.5p to 570p and Trinity Mirror lost 18.5p to 399p. The FTSE 100 was up 24.9 points to 5,189.7 points despite largely inconclusive signals from the US economy where the unemployment rate declined but manufacturing figures were slightly weaker than expected.
Arcadia slumped 13p to 257p after terminating talks with its Icelandic suitor Baugur. There were some suggestions that certain stock market players knew something they should not have as Arcadia shares traded at 230p straight after the collapse of bid talks was announced yet ended some 17p higher at the end of the session. Dealers attributed the frantic buying which followed the announcement to investors covering short positions as they locked in profits from the failure of the bid.
BT Group rose 11.5p to 236p ahead of results next week. The figures will be the first since the demerger of the group's wireless division mmO2 with profits expected to be fairly flat. Analysts are forecasting underlying profits of between pounds 260m and pounds 360m. Investors will as be keen to get a first impression of BT's new chief executive Ben Verwaayen. Diageo jumped 24p to an all-time high of 848p. Investors hence ignored the advice of UBS Warburg which cut its rating on the stock to "hold" from "buy" and argued that the rise from the 650p level since the start of last October had left the shares fully valued. Amersham rose 12.5p to 670p after the acquisition of two filtration separation businesses used in the production of biopharmaceuticals.
UBS Warburg pushed Inchcape 19.5p better to 641p as the broker upped its price target to 740p from 600p and reiterated a "buy" recommendation. UBS believes that Inchcape, which imports and distributes cars as well as providing fleet management services, is unique among its peers. This is thanks to its diverse geographic mix and having one of the most vertically integrated operations in the UK. Hence UBS expects Inchcape to continue to trade at a premium to its rivals. …