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(Re)insurance stocks fall sharply again

(Re)insurance stocks on both sides of the Atlantic have plunged in trading as fears continue to linger over damage to the financial services sector from the fallout of the sub-prime and credit related crisis.

The sell-off of financials accelerated this afternoon after Wall Street opened down, with the S&P 500 falling 0.6 percent to 1250.38 driven by a 1.3 percent slide in its financial sector.

And a number of financial powerhouses were hit, with Merrill Lynch down 8 percent and Citigroup off more than 4 percent.

Concerns over the prospects for (re)insurers, meanwhile, re-emerged at the end of last week with Munich Re’s revelation that it would miss second quarter and full-year earnings targets as a result of poor performance on its investment portfolio, and against a backdrop of soft market underwriting conditions (see article 3).

The German reinsurer’s shares initially fell 11.31 percent to EUR102.70 on European stock exchange XETRA after announcing the profits warning Friday before a late rally, and closed down 2.4 percent to EUR105.29 today.

Its reinsurance rival Swiss Re – which has already taken a series of significant credit related writedowns – also suffered today, with its shares closing down 4.04 percent at SFr 64.20.

In the US, shares in American International Group (AIG) have fallen sharply again, amid ongoing concern over its exposures to the credit crisis – particularly in its financial products division, which is expected to reveal further writedowns when the company reports its Q2 figures on 6 August.

The giant US insurer’s stock was trading down 7.56 percent to $25.18 at the time of writing.

Catlin Group was the worst hit among London-listed (re)insurers as its shares closed at 195.75p, down 8.33 percent on the day.

Brit Insurance Holdings, whose share price has suffered heavily in recent months, saw further falls. The company closed down 7.65 percent at 154p.

Hiscox Ltd and Amlin plc were not immune from the slide, the former falling 7.12 percent to 195.75p, and the latter down 4.62 percent to close at 252.75p.

Markets were further weakened by a report from the International Monetary Fund this afternoon suggesting global financial markets are “fragile” and that indicators of risk are still “elevated” a year into the crisis.

It warned that US credit growth could further contract and that emerging markets could be tested by tightening financing availability and counter-inflationary measures from policymakers.

The report also highlighted a slowdown in European housing markets, and predicted that financial institutions face a second wave of losses from loans other than sub-prime mortgages.

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