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Lloyd's: equity market rally is nearing end

THE stock market rally has run out of steam, according to Lloyd&rsquo;s of London. The world&rsquo;s oldest insurance market yesterday poured cold water over hopes that surging equity prices would continue to rise into the latter stages of the year and into 2010.<br /><br />Pointing out that shares had risen 50 per cent since March, Lloyd&rsquo;s cautioned that the market had run ahead of itself.<br /><br />&ldquo;Favourable market movements have resulted in investment returns somewhat above the very modest levels which might be predicted from the low prevailing levels of interest rates and risk free yields,&rdquo; Lloyd&rsquo;s said in a trading update. <br /><br />&ldquo;However, the scope for further such gains is increasingly limited and we expect that current market levels will make it difficult to achieve significant returns in the balance of the year,&rdquo; the bank added.<br /><br />Lloyd&rsquo;s, which traces its origins back 321 years to a coffee house in Lombard Street where merchants met to insure ships, said investors had been encouraged into riskier assets over recent months by growing confidence in the global economy and the desire to move away from the low yields offered by cash.<br /><br />Over the last nine months the Lloyd&rsquo;s&rsquo; investment return was a net &pound;110m, which included a &pound;36m gain on the purchase and cancellation of Lloyd&rsquo;s debt securities in April and foreign exchange losses of &pound;17m from the weaker pound. <br /><br />Retaining its full-year forecast, Lloyd&rsquo;s said it remained financially strong, with total assets exceeding solvency shortfalls by its members by &pound;2.55bn, little changed from &pound;2.5bn three months earlier.<br /><br />Insurers&rsquo; finances look set to get a boost this year thanks to a quiet US hurricane season. Last year profits halved after hurricanes Ike and Gustav cost an estimated $50bn, making it the industry&rsquo;s second-costliest year on record.