FTSE 100 Friday close: Index edges ahead despite insurance stock turmoil

28th March 2014

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After seeing their share prices hammered following the Chancellor’s Budget speech the UK’s insurers once again endured a serious wobble over the trading week writes Philip Scott.

Despite the turmoil currently engulfing the sector, the FTSE 100 managed to climb by 1% over the week to close on Friday at 6,615.58, marking a 27.26-point rise on the day.

News emerged on Friday, that the City watchdog, the Financial Conduct Authority is to launch a review into so-called ‘zombie funds’, which could impact up to some 30 million policies sold by insurance groups as endowments, pensions and investment bonds between 1970 and 2000. By mid-morning trading many had endured tough share-price falls.

The regulator is acting over concern that firms are now “exploiting” loyal policyholders, who are “not given the same priority as new customers” and instead face high fees and substandard service according to a report in The Telegraph.

Resolution was once again the worst hit amongst its insurance peers after its shares plummeted by 7% to 296.3p. The UK’s biggest insurer Aviva was also nursing loses, after sliding 2% to 470.2p while Prudential loosened 4% to 1,280.5p. Legal & General managed to claw back some loses on Friday and closed flat at 205p. Standard Life bucked the trend and added 4% to 380.3p, after it announced this week that it was buying fund group Ignis Asset Management for £390m.

Engineering firm Babcock International was one of the leader-boards steepest fallers over the week, losing 7% to close at 1,292p. The group is looking to its investors to raise £1.1bn to help fund the purchase of Westminster-based helicopters business Avincis.

Troubled cruise operator Carnival, infamous for the Costa Concordia incident back in 2012 was also down by 7%, finishing at 2,290p. Analysts at broker Numis Securities downgraded the firm’s shares to a ‘hold’ recommendation following the announcement of the group’s first quarter results, which reported a net loss of $15m.

Precious metals miner Randgold Resources was also among the week’s fallers after dropping 6% to 4,534p as was Fresnillo, down 4% at 850p.

Within the banking community Lloyds lost 4% over the week to 74.34p after the Government sold £4.2bn worth of shares paring its stake back to 25%. The move puts the bank on track for a complete exit in the next 12 months.

The Chancellor George Osborne, commenting on Wednesday’s sale, said it was “good value” for the taxpayer. The cash he added would be used to help pay off national debt.

Elsewhere the still majority taxpayer owned Royal bank of Scotland managed to firm 3% to 307.2p while HSBC edged 1% ahead to 611p. Barclays lost 2% to 231.1p as Standard Chartered enjoyed a better week, with its stock lifting 5% to 1,259.5p.

Buoyed partly by an upbeat ‘overweight’ recommendation from brokers at JP Morgan Casenove, Aberdeen Asset Management is the week’s top riser, firming 9% to 395.3p. Notably though both Credit Suisse and Citigroup also reiterated ‘neutral’ recommendations on the stock. Next week sees the emerging markets specialist deliver its latest trading update.

In contrast to its peers, RSA Insurance also managed to make some ground this week, rising 8% to 89.55p. The embattled insurer is looking to raise £773m via a rights issue.

Also witnessing a week of gains were discount carrier Easyjet, and Anglo American, each 5% higher, closing respectively at 1,711p and 1,509p. Unilever finished 6% better at 2,557p while for its part SAB Miller jumped 7% to 3,025p, on the back of rumours that the Peroni owner could be a potential bid target.

Next week sees updates and results arrive from Booker, Quindell and Tate & Lyle.

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