Newton's laws
LLOYD'S is lucky to have its defence doc- ument already written. David Newton at Lime Street Management seems to have seen my bid coming. He diagnoses a crisis of confidence at Lloyd's, and he says: 'It is at times like these in the stock market, when you get the inevitable selling climax, that the shrewd investor steps in and picks up the pieces. However, he will only do that if he believes the fundamentals are sound.' Mr Newton sees the insurance market on the turn, and Lloyd's turning with it. He sees a far more professional Lloyd's, which will not allow a few greedy or ignorant peo- ple to put the whole market at risk. Five Lloyd's syndicates, blown up like balloons in the 1980s and now popped, account (he says) for only 2 per cent of the market but for 50 per cent of its losses. That concentra- tion of risk is bad insurance, and it has hit Lloyd's where it hurts — in its credibility. Those who live by Lloyd's good name may now have to pay to protect their asset. The investment would pay off, Mr Newton maintains, in the happier times which he sees coming. A merchant banker would recognise this as the classic bid defence. Don't sell, it says: there is value in the com- pany which should be unlocked for the shareholders, and not creamed off by the bidder. The management must then show the will and the skill to make that promise good.
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