Shares in Australian insurer and fund manager AMP have hit new lows after it tried to reassure investors it has enough capital to meet UK regulatory requirements.

In a prospectus for a $A750m (£265m) share issue released on Wednesday, AMP revealed its UK-based Pearl Assurance unit did not meet British regulatory capital requirements but would "by year end" if stock markets did not fall further.

The revelation sent AMP shares tumbling 5.7%, following a 3.6% fall on Wednesday.

In a statement on Thursday, AMP tried to reassure investors it had enough capital and could fund its UK operations, which make up 70% of its assets, "subject to no material deterioration in investment markets".

Cash crunch

In the prospectus, AMP said that for every 100 point move by the UK's FTSE index, its solvency would be affected by £120m.

The FTSE fell 159 points on Wednesday and has fallen 1,352 points so far in 2002.

"However, the correlation between the two elements is not linear and the FTSE is not the only factor influencing AMP Pearl's capital position," AMP said.

Analysts and investors had thought AMP already met capital adequacy requirements for its UK operations.

The UK-based Pearl "with-profits" fund guarantees returns on investments.

AMP has recently said it would pump about A$1bn into its UK operations and close some products to new customers.