One thing that interests me greatly in the current crisis in the domino effect. Seemingly unaffected parts of the economy are all of a sudden linked to the credit crisis and taken down with it.
Today is Aviva's turn. The insurance giant, recently having spent much money with bruce Willis to remove all traces of the Norwich Union name, has released its annual results. On one level they are a good set, operating profits up 10% year on year. As expected, in difficult time demand for insurance is likely to go up and not down.
Then the bad bit, its investment division, in charge of a huge chunk of UK private sector pensions, has been forced to write down its value by £1 billion odd. Much of this is due to the falls in value of the UK stock market, bond market and residential/commercial property markets.
As a result, investors are fleeing and Aviva is down 26% today to 211odd as I write. Aviva also committed to paying a huge dividend, matched only really by BP in the FTSE100. Yet still the market drops the share like a dog.
Legal and General has had the same treatment earlier this month.
Only a couple of months ago Insurance companies were the last darlings of the Financial Services sector; not anymore. Which sector, yet untouched, is next for the cliff face?
