Aviva and Friends Provident have revealed a combined near-£300m exposure to Lehman Brothers in the wake of the investment bank's slide into bankruptcy this week.
Life and pensions provider Aviva reports a total debt exposure of £270m plus what it calls “minimum” equity exposure, while Friends Provident says it has a total nominal debt exposure to Lehman of £18m, predominantly in the form of senior debt.
Both companies say they expect the total loss from their holdings to be “substantially lower” than their total face value exposure as a result of “a number of factors including taxes and recoveries”.
Aviva says its debt exposure to Lehman Brothers is mostly senior debt but also includes money market exposure and a “small amount” of credit default swaps exposure.
It adds it also has counterparty exposure to Lehman through derivative contracts and securities lending transactions. It is in the process, it says, of unwinding the contracts and does not expect to incur any material writedown as a result of unwinding them.
“Aviva continues to monitor developments in the market, and Aviva's risk management procedures and credit controls continue to ensure the group has a strong balance sheet and capital position,” a spokesperson says.
Friends Provident, too, says the majority of its £18m debt exposure to Lehman Brothers is in the form of senior debt, adding it has no direct counterparty exposure to Lehman through derivative contracts.
A spokesperson says: “Friends Provident is monitoring developments in markets closely to protect the financial position of all stakeholders.”
Meanwhile Old Mutual says it does not hold common equity in Lehman but reveals its American arm, US Life, has around a $50m exposure to Lehman in senior unsecured debt and $5.7m of collateralised derivatives exposure.
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