Insurers suffer heavy falls in City

Insurers sustained heavy falls on the London market today after one of the sector’s biggest stocks hinted it may have to cut its dividend.

Prudential also reduced annual with-profits bonuses and the company’s full-year results announcement helped send a number of rivals lower.

With Wall Street shares also shaky amid renewed war concerns, the FTSE 100 Index reached lunchtime 67.2 points down at 3634.6.

However, the performance still represented an improvement on earlier in the session when the Footsie found itself more than 100 points weaker.

But analysts are not expecting much more of a revival as the Dow Jones Industrial Average is forecast to open lower later today after shedding 2% in its previous session.

In London, most of the attention was focused on the insurance sector, with Prudential down almost 19%, or 73.25p, at 319.75p after the group said it was “inappropriate” to set its dividend policy for 2003 at the current time.

The delay caused expectations that the group will cut its dividend amid the tough economic conditions and volatile stock markets.

Prudential set the tone for London’s other listed insurers which dominated the Footsie fallers’ board with falls of 7% and more.

Friends Provident fell 8.75p to 90.75p, Royal & Sun Alliance lost 6p to 72.25p, Friends Provident eased 8.75p to 90.75p and Legal & General slipped 5.25p to 69p.

Norwich Union owner Aviva escaped the heaviest falls, easing 4%, or 17.5p to 387.75p.

Elsewhere, engineering group Invensys was again in difficulty, slipping another 1.25p to 13.25p, as investors fretted over trading conditions following a profits warning earlier in the month.

Only five stocks were in positive territory and included HBOS, the banking group created out of Halifax and Bank of Scotland.

HBOS shares were initially lower but recovered to stand 27p ahead at 616.5p as investors cheered full-year results that were ahead of expectations.

Pre-tax profits rose 22% to £3.06bn (€4.47bn), although the group gave cautious remarks about the economic climate.

The only other significant upward movement in the Footsie came from supermarket group Morrisons, up 3.25p at 166p.

Among smaller stocks, budget airline easyJet tumbled after it said it would be hit by £18m (€26.32m) of costs in the first half year, part of which relates to integrating Go.

The group also said it had cut fares in recent months and shares fell 15% on worries about yields – down 35.5p to 206.5p.