Savers hit by new property fund plunge, freeze on withdrawals, Ambac lose AAA rating

Savers hit by new property fund plunge

www.guardian.co.uk

The panic in commercial property funds is likely to intensify this week, as financial advisers are tipping Norwich Union to be the next asset manager to put a freeze on withdrawals by small savers.

Two other large funds run by insurance companies have already locked in their customers. Insurance company Aegon said last week that investors in its Scottish Equitable property fund may have to wait up to a year to get their money back and Friends Provident introduced a six-month delay on redemptions from its property fund in December.

(visit the link for the full news article)



[edit on 20-1-2008 by infinite]

[edit on 20-1-2008 by infinite]

Norwich Union only has 6.4% in cash...

Founder John Duffield, who owns 12.5 per cent of the company, said he had personally lost £100m in the past six months

This all started because of what happened the other day;

Call for calm as property panic hits insurer

FINANCIAL experts last night urged customers not to panic after one of the UK's largest insurers froze its property funds following a run on withdrawals.
Credit crunch fears have prompted investors to pull their capital from the Scottish Equitable Property Fund, leaving it with a depleted reserve which could be unable to deal with further withdrawals.

The situation has prompted fears that members of other schemes could also pull their resources out, in a scenario disturbingly reminiscent of the Northern Rock debacle.

news.scotsman.com...

This is going to get MUCH worse over the next few weeks. Insurers are being effected and are unable to pay out...worrying news

www.guardian.co.uk
(visit the link for the full news article)

Panic selling shuts £2bn fund

www.guardian.co.uk...

Down to 1% of total assets!!

it does not look good for us here in the UK, i feel sorry for people who have recently bought houses with large mortgages, i am so glad i am with a Euro bank !!

thanks for posting this.

snoopyuk

Yeah, it's VERY worrying times for us in the United Kingdom.

If the Norwich Union reports are true, this is going to be Armageddon for our finanical system. NU are one of the largest insurers in the UK

reply to post by infinite


yeah to be honest i hadnt even thought about the insurance side of things !
if this rain keeps up and we end up with more floods it is gonna hit them hard.

the floods from last summer caused the insurers to have a small hic-up .

interesting, worrying times , i am glad as i said earlier that my money is in a Euro bank !!

snoopyuk

reply to post by snoopyuk


I'm consider putting all my money into a foreign account very soon.

But, OMG!!! holy crap!!

Ambac's Insurance Unit Cut to AA From AAA by Fitch Ratings

Jan. 19 (Bloomberg) -- Ambac Financial Group Inc., the second-largest bond insurer, was stripped of its AAA credit rating by Fitch Ratings after the company abandoned plans to raise new equity.

Without its AAA rating, New York-based Ambac may be unable to write the top-ranked bond insurance that makes up 74 percent of its revenue. Ambac may quit the business or sell itself, said Robert Haines, an analyst at CreditSights Inc., a bond research firm in New York. The downgrade throws doubt on the ratings of $556 billion in municipal and structured finance debt guaranteed by Ambac.

Bloomberg

THIS IS BAD NEWS!!

title updated to include Ambac..

this is why it's now serious

Cramer on WHAT IF

U.S. banks are taking a beating in the market because of the billions of dollars in subprime mortgages they have on their books. And with the insurers who backed the loans in danger of going belly up, there doesn’t seem to be a bottom for these stocks. If that ever happened, Cramer said, the entire system would collapse dominoes style.

reply to post by infinite



this 'run' to cash out is causing an otherwise solvent company
to sell whatever they can, at whatever price... thus putting
excessive strain on their assets and holdings...

but a prudent operation would have had a money profile
and enough liquidity/cash to handle a 90% run on their treasury...

too bad that they too were cutting-corners,
instead of being prudent - they were maxing out their allowable by regulation ready cash to be 'on hand' for redemptions.....
myopic business practice -> imho

yet the crew most likely got huge X-Mas bonuses for being less than
'on-top-of-any-situation'..... final call: can 'em !!



[edit on 20-1-2008 by St Udio]

It's shocking that these firms have less than 10% cash

too bad that they too were cutting-corners,

couldn't agree more

It's hard to believe that this finanical crisis could have been avoided if these companies had decent, sensible and practical business plans.

Question - whats the legality of them saying `no you can`t have your money back` to people?

Another source covering this story

Life companies closing the door on property fund withdrawals

Similarly, Scottish Widows, which has £2bn in life and property pension funds, said it was carefully monitoring outflows, and considering whether it needed to follow Aegon.

A spokeswoman said: "I'm afraid we can't rule it out. At the moment there is no change, but we are seeing withdrawals and after all the speculation and news coverage, the position could deteriorate further, at which point we might well be forced to act."

Daily Mail

Scottish Widows is another organisation that might have to be added to the ever growing property fund casualty list

reply to post by infinite



and that's exactly why the scion of Omaha, Mr Warren Buffett
and Berkshire Hathaway are doing a new startup, IPO...
specializing in Municipal bond Insurance (& underwriting?)

Thanks infinite for that update,

It was just a matter of time for the insurance to fall out.

Funny but perhaps that is from where the 400 billion dollars perhaps more even trillions in loses still to be accounted for will come from.

We have to understand that like ST Udion posted on another thread many of this firms and companies waited until this year to disclosure their loses it could be worst than expected when it comes to numbers.

Meanwhile they have been able survive on cash infusion by world banks.

They have tampered with numbers and lie to their costumers waiting for the markets to fix itself.

Now Bernanke address to the congress didn't produce very good out looks, but a strong warning here in the US for government intervention or else.

Then the government so call stimulus package in the name of tax returns was nothing more than another bail out to make numbers look good but do not address the real problem at all.

What this financial markets needs is to fired all the morons that has taken over with nothing than greed stamped all over their faces including some government leaders and start from the bottom up.

They all should be going to jail, from corruption, greed and deceiving the people that trusted them.

This is going to make US markets look great this week as another chapter on the financial drama comes to its end.

I found more to the story in CNN.

WEEKEND PRESS
* Anger at Brown as Rock bill may hit 60 bln stg: UK Prime Minister Gordon Brown sparks a political row by endorsing a deal to bail out Northern Rock with tens of billions of pounds of taxpayers' cash; the plan stops short of nationalising the stricken bank by allowing a private sector company -- possibly Sir Richard Branson's Virgin Group -- to take it over - Sunday Telegraph
* Brown accused last night of a 'final slap in the face to taxpayers' over Northern Rock in a move that could lead to Branson buying the bank at a knockdown rate - Sunday Times

money.cnn.com...

If Ambac cannot find the £500 billion then we are dealing with the collapse of the Western finanical system.

China, India and the rest of the developing markets cannot and do not have the resources to prevent this from collapsing. It would literally be finanical Armageddon.

And due to our economies being in poor conditions, too much debt, any rescue plan is going to be weak and ineffective.

reply to post by marg6043


Brown has made a mess of it.

The EU still has to sanction the deal (due to European competition law, government money might be seen as unfair to competitors)

update

Ambac scraps share offering and decides AAA rating not worth saving

The crisis sweeping the bond insurance industry escalated yesterday as America’s second-biggest bond insurer effectively began to wind itself down by cancelling a plan to raise $1 billion (£511 million) of new capital in a move that sacrificed its AAA credit rating.

TimesOnline

MBIA and ACA are expected to follower suit, with Ambac failing to raise capital it is likely the insurance company will state it cannot guarantee claims.

[edit on 20-1-2008 by infinite]

they are dead then - once they cannot guarantee claims there business is gone and watch it fall away.

hot damn.

Hehe. The media is tacking out its "OMG OMG OMG DOOM AND GLOOM WERE ALL GOING TO DIEEEEEE" stick and smacking people with it. But...but...I thought the mass media would neeeeeever report such things? Just proves that everyone's still buying into the mass media.

People are getting so emotional and are salivating at the possibility of "financial armageddon." It's amazing how much the human spirit loves despair. It's like drawing flies to a dead animal.

I wish the world was as simple as blaming all the problems on whoever is power. Unfortunately, in reality no one is controlling the economy, no one can take it down, and no one can take it back up. Its a cycle, and you cannot stop it. If world leaders had 1% of the power some people think they have over the economy, we'd never be in a recession - they profit from booms.

But beat the drums of economic doom and gloom - I'll have to make sure I watch out in a year or two to see who is getting the credit for the cyclical upswing which will happen regardless of who is in power.

[edit on 20-1-2008 by LightinDarkness]