Newspaper article The Journal (Newcastle, England)

Insurer Wins by Insuring Itself

Newspaper article The Journal (Newcastle, England)

Insurer Wins by Insuring Itself

Article excerpt

INSURANCE group Aviva led a rally in the sector yesterday after it gave assurances over its capital strength amid the stock market turmoil.

The Norwich Union owner said it had protected itself against recent share price declines, which have the potential to hit the group's surplus regulatory capital.

Its capital excess - required under regulatory rules - stood at about pounds 1.9bn, up from pounds 1.8bn at the end of last June, according to Aviva.

There had been fears over the capital buffer after Aviva warned last June that a 20% fall in markets could wipe pounds 700m off the surplus. The FTSE 100 has lost more than that since then as equity markets have collapsed.

But Aviva confirmed yesterday that hedging policies, which are effectively insurance protection, had succeeded in sheltering the group against falls.

It has also taken out further protection, before the recent devastating market declines, which means that even if markets were to plunge a further 40%, its hedging protection would see the capital surplus reduce by pounds 700m. …

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