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Warburg warns life trio are FAR from strong

Investment banker UBS Warburg is casting doubt on the capital strength of Scottish Mutual, Clerical Medical and Scottish Widows and questions their ability to continue “business as usual”.

The analyst&#39s report comes as Scottish Mutual says it is moving away from with-profits, which Warburg says could see its new business through IFAs dry up.

The report on the life subsidiaries of Abbey National, HBOS and Lloyds TSB claims even if the FTSE reaches 5,000, only HBOS would have a free-asset ratio above the 5 per cent which companies traditionally need to continue writing new with-profits business. Abbey would have a FAR of 4.3 per cent and Lloyds 3.8 per cent.

If the FTSE finishes the year at 4,000, both Abbey and Lloyds would have FARs (including future profits) of 0 per cent, and HBOS 0.9 per cent.

Clerical Medical public relations manager Gordon McAra says: “We have not been forced sellers of equities, unlike some competitors. We benefit significantly from HBOS and all that brings in terms of support and market confidence.”

Scottish Widows media relations manager Susan McDonald says: “We are well capitalised at current market levels. We welcome that it finds we have the most compelling strategy of the three.”

Scottish Mutual spokeswoman Christine McAllister says: “We are still in the market but we are not a one-trick pony. We are rotating away from with-profits but have not turned off the tap yet.”

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