Insurer shares plunge on renewed eurozone fears

AXA, Aviva and Allianz have lost a large part of their share price gains in 2012 in just a couple of weeks as investors feared Spain was heading for a gigantic bailout.

Including sharp drops in stock prices yesterday, AXA’s share price has dropped 13% this month, followed closely by Aviva at 6.5% and Allianz at 5.6%.

All three insurers have invested heavily in government bonds of Italy and Spain, the two countries most at risk of needing a bailout.

Poor economic data and concerns over Spanish banks’ exposure to real estate means investors yesterday were asking nearly 6% for the Spanish government to pay on its 10-year bonds.

Borrowing costs on Spanish debt had eased in 2012 as banks had used loans from the European Central Bank to buy up eurozone sovereign debt, but there are investor concerns that the effects of the loans are now wearing off.

One insurer resilient to the eurozone problems is RSA which said in its 2011 results that its peripheral eurozone exposure, at £138m, was “very limited”.

RSA said: “The current economic crisis adds further uncertainty and volatility to underlying levels of market and credit risk in the Eurozone

“The group has, however, very limited direct exposure via its investment portfolio to the Eurozone and to the peripheral Eurozone countries in particular.

“As with all other invested assets, limits are set in line with the group’s risk appetite. The group continues to monitor the situation closely and take action to manage its exposure as required.”