Insurers slide as Barclays turns negative

Insurers such as RSA were among London's biggest fallers on Tuesday as the FTSE 100 hit a one-month low.

Low interest rates and a change to the solvency regime are stoking pressure on the insurers yet the stocks have outperformed the European market each of the past three years, said Barclays, which turned negative on the sector.

The outperformance was "driven by the growing payout ratios and strong dividend growth", said the broker. "But earnings and solvency headwinds should combine to stall or even shrink dividends, reducing this key support."

The IMF's Financial Stability Report in April called on regulators to act promptly where solvency is weak.

Insurers therefore risk getting the same treatment as banks, whose capital ratios have been edged higher since the credit crunch, said Barclays.

Yet European insurers are trading at all-time highs against book value, the broker argued.

It moved to an "equal weight" rating on RSA, off 2.4 per cent to 415p and advised selling Lloyd's insurers such as Lancashire, down 3.5 per cent to 607.5p, Amlin, which slipped 2 per cent to 446.3p, and Hiscox, which fell 3.1 per cent to 800p.

Fears of a Greek default meant the FTSE 100 erased a 1 per cent gain to close down 0.8 per cent, off 58.37 points, to 6,927.58.

HSBC faded 3.2 per cent to 625.9p, having opened higher on results, after chief executive Stuart Gulliver said the rising UK bank levy would make its progressive dividend policy impossible to maintain.

Another worry for investors was that low loan-loss charges may not be sustainable.

Aberdeen Asset Management lost 2.7 per cent to 450.6p after reporting £11.3bn of outflows in the six months to March, due largely to the continued weakness of its equities business.

A £100m share buyback fund also disappointed against market expectations around twice as high.

Man Group slipped 5.5 per cent to 183.5p on a weak recent performance for its AHL funds, which tend to suffer during market volatility.

Sharp losses on Friday left AHL Diversified about 7 per cent below the high water mark that it reached in mid-March.

A day before results, Imperial Tobacco lost 3.4 per cent to £31.20 after Nomura advised selling.

Premier Inn owner Whitbread slipped 3.3 per cent to £50.50 in the wake of the unexpected retirement last week of chief executive Andy Harrison.

Talk that his successor may be Christopher Rogers, managing director of its Costa Coffee division, has damped persistent speculation about a Whitbread break-up.

A reassuring trading update lifted Just Eat 3.9 per cent to 473.6p.

Indivior, drugmaker spun off last year by Reckitt Benckiser, rose 8.5 per cent to 220.4p after its maiden results showed US sales of the Suboxone heroin substitute holding up better than forecast.

Management kept 2015 guidance unchanged ahead of the interims, saying the deterioration in US pricing it had expected may be a matter of timing.

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