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HBOS bolsters Clerical with £500m injection

Clerical Medical has had a cash injection of £500m from parent HBOS to improve its financial strength and investment flexibility after investment losses sustained last year.

The company has declared a free-asset ratio before allocation of the new capital of 7.1 per cent excluding future profits compared with a FAR of 11.5 per cent at the end of 2001.

HBOS says Clerical Medical has seen a “favourable” shift away from with-profits during 2002 and that sales to IFAs fell by 5 per cent in 2002 to £561m from £590m on an equivalent premium income basis.

HBOS spokeswoman Jo Gill says: “Basically, the money was put in to improve the FAR and also to improve investment flexibility. We also recognise that policyholders need to be able to sleep well at night.”

Commerzbank analyst Roman Cizden says: “This shows that Crosby & Co know the right way to run a life company, unlike Abbey National which has starved its life companies of cash. This gives them the financial strength to write new business. Remember, it is still a big holder of equities.”

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