The collapse in share price has forced SunAlliance and London, on of two life insurance funds of R&S...
The collapse in share price has forced SunAlliance and London, on of two life insurance funds of R&SA, to make use of a £500m capital guarantee to maintain its solvency, reports this morning's Times newspaper.
The guarantee was put in place in the wake of the sharp fall in stock prices after September 11 but at the time R&SA said the fund did not need the cash.
However, it is understood that SunAlliance & London (SA&L) has begun drawing cash to ensure that it can meet the Financial Services Authority's (FSA) solvency requirements as a result of the sharp fall in share prices since the beginning of the year.
SA&L can draw on an immediate £240 million with another £260 million available. It is thought that the company has drawn down £120 million so far. The cash has been provided in the form of a loan.
Britannic and Aviva suffered contrasting fortunes yesterday after new research put them at opposite ends of a list of life insurers at risk of breaching solvency regulations, says the Daily Telegraph.
Britannic lost 48p or 12% to 344.5p its lowest level since 1992, after ABN said its position was the "most precarious" of Britain's quoted life insurers.
However Aviva, formerly called CGNU, rose 10% to 412p, a day after reaching a 13-year low of 375p, after ABN Amro said it would be able to withstand further large stock-market falls before having to sell equities.
Life shares have plunged by up to 53% this year on concerns that the Financial Services Authority's solvency margin regulations will force insurers to sell large amounts of equities.
BANK of Scotland may call in debt owed to it by split capital investment trust BFS Geared Income in which thousands of investors' savings are at risk, says the Scotsman.
The beleaguered trust, which has suspended its shares, has debts of about £89 million, owed to both Bank of Scotland and Lloyds TSB. A BoS spokesman said: "When a trust has suspended its shares, it is close to wind-up and it is possible at that point that we may call in its debt."
The trust will continue to pay interest on its bank debts but said it needs a big jump in the value of its portfolio of other split trusts to enable it to pay holders of "zero" shares - which offer a set amount of capital growth - in October 2003.
The scenario appears even worse for other classes of the trust's shareholders as split trusts' ordinary and income shareholders are only paid after repayments of bank debt and payment of zero holders. BFS chief executive, Tony Reid, said: "If there are no assets, they are entitled to nothing."
There is no chance that the requirement to buy an annuity with pension funds will be changed in the next five years, an adviser to the Government's Modernising Annuities paper, the Telegraph reports. ,/p>
However, Ros Altmann, independent policy adviser on pensions, said it was "more than 50% certain" that the Government would allow providers to offer a "money back guarantee" annuity. This would enable pensioners to pass on any unused part of the lump sum they invest in an annuity to their heirs after they died, but they would have to take a lower annuity rate for the privilege.
Ms Altmann added that pension providers may be required to ensure that policyholders receive a basic level of financial advice before deciding when, and from whom, to buy an annuity.
HOUSEHOLDERS across Britain will be faced with dramatic increases in council tax bills to cover shortfalls in local authority pension funds, which have lost £18 billion on the stock market in the past three months, continues the Scotsman.
Scotland's 11 local authority pension funds have lost £2.4 billion since the end of March as the stock market has slumped, leaving councils with a black hole to fill if they are to meet their pension liabilities.
Local authorities invest their employees' pension contributions in shares, but because staff pay a fixed sum , councils have to top up the funds if there is a shortfall, leading to an inevitable increase in council tax bills.
Many of Scotland's local authorities have already had to increase the amount of money from public funds which goes into pension plans over the past two years, but the substantial stock market falls will force them to raise millions more every year to cover the losses.
A major audit of Scotland's local authority pension funds is under way and the results will be published in October. Experts stressed that until the results were announced, it is impossible to tell what the impact on council taxes would be, but there was general agreement that local authorities would have to pass on their losses to the householder.
<>Executives and employees would face up to two years in jail and unlimited fines if they misled auditors, under plans for a sweeping revamp of UK company law, says the FT.
The move is the first regulatory step by the government to reform the accounting profession in the wake of the crisis of confidence in corporate governance standards.
The penalties are proposed in a wide-ranging white paper for modernising the UK's company law, which the government believes is still rooted in the Victorian era.
Further reform proposals are expected next week after a formal review of such corporate scandals as the collapse of Enron, the US energy trader. Ministers, regulators and accountants will on Wednesday meet to discuss possible changes.
BAYARD Partners, one of London's oldest hedge funds, has shut itself down, blaming a "toxic mixture of overvaluation, unrealistic expectations and sentiment-driven volatility" on financial markets, adds the Scotsman.
The firm, founded in 1992, said markets were being grossly distorted - partly by the increased number of hedge funds operating in European markets, all looking to make short-term returns on investments.
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