Corporate capital flop means crisis for Lloyd's

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The Independent Online
LLOYD'S of London is set to face an investment crisis next year. Large numbers of names are pulling out of the market following the huge losses of the past four years, and corporate capital will fail to replace them.

Estimates for the drop in capital investment by names - the individuals whose wealth has traditionally backed the market - vary from 15 to 30 per cent. In many cases they are being forced out because they have no funds left.

Despite last month's issue of a prospectus for a joint venture by Jardine Matheson and Swiss Bank Corporation for a pounds 50m investment trust aimed at Far East and European investors, it looks increasingly as if corporate investors are shying away from injecting large amounts of fresh capital.

The range of estimates for the fall in names' investment means the market will have to write pounds 1.5bn to pounds 3bn less insurance business than last year. Mark Hewlett of Jardine Lloyd's Advisers, a market analyst, estimates that no more than pounds 400m will emerge this year to relace the fall in names' investment.

The corporate capital investors say they have been disappointed by the performance of the investment trusts which began trading at the start of the year. All but one are trading at a discount to their issue price.

Although the trusts raised pounds 900m of new capital they fell short of expectations and many trust launches were abandoned.

Many of those who failed last year have confirmed they will not try again this year.

Charles Fry of Johnson Fry, the investment adviser, said: 'We raised only pounds 8m last year, which was bad enough, and things could only be worse this year.'

Lloyd's reported a worse than expected pounds 2bn loss in May for the 1991 year of account and analysts are predicting a further pounds 1bn loss for 1992, a year that had been exected to be profitable.

There is now a perception that premium rates are beginning to fall, meaning the market could still be some way from reporting good profits.

----------------------------------------------------------------- LLOYD'S CORPORATE CAPITAL TRUSTS ----------------------------------------------------------------- Offer High Close price this year yesterday Abtrust Lloyd's 100p 97p 81 1/2 p Angerstein 100p 112p 86p CLM Ins Fund 100p 117p 90p Delian 100p 108p 89p Finsbury Und 100p 114p 89p HCG Lloyd's 100p 105p 84p Hiscox 100p 114p 98p LIMIT 100p 119p 94p Masthead 100p 110p 91p New Lon Cap 100p 106p 79p Premium Trust 100p 99p 83p Premium Und 100p 124p 101 1/2 p Syndicate Cap 100p 107p 83p -----------------------------------------------------------------