Daily briefing: Friday - Consolidator conundrums

Well, that rules out that one then. A merger between Giles and Oval would hit staff morale, rack up unnecessary expenses and, ultimately, be a poorer strategy than if the two business continue to buy up smaller brokers. So says expert analyst John Borgars on insurancetimes.co.uk this week.

The question for Giles and Oval, then, is what next? They can continue the strategy of smaller acquisitions, but it’s going to take some time for them to reach the critical mass for flotation, and you have to wonder how much patience their private equity backers have.

Decisions, decisions

An easier route would be for some kind of transformational deal by merging with a large broker outfit, but that is fraught with problems, as pointed out by Borgars, unless the fit is right.  

The best bet for a merger for either of these two would have been Heath Lambert, which has a good reputation and a unique book of state-backed deals. But Gallagher has beaten them to it and bought the business for £97m.

Alternatively, they could consider floating as small-scale stocks, but that would be a big risk, as they could easily end up as small-scale, illiquid stocks that at best flatline and at worst decline.

The return of the hard market is the one thing that must be giving them both hope, but nobody knows when that is going to kick in.

The bottom line is that no one seems to know what the long-term game plan for Oval and Giles is. Suggestions on a postcard please.

As mad as a motor insurer

Motor insurers lost more than £2bn last year. No surprise there, then. Insurers have been frantically pushing through rate rises for the past 18 months to make up for their losses.

The bad news, however, is that there are signs that some of them are ready to break ranks and quell rate increases in order to win back market share.

With bodily injury inflation at around 15%, such a move could create real problems across the market. But, then again, when was motor insurance ever ruled by sanity?