Michael Faulkner looks at this weeks insurance stocks
The FTSE 100 has taken a battering in recent weeks as the price of crude oil continues to soar, leading to much talk this week of a return to a bear market. A bear market – the opposite of a bull market – is defined by shares falling more than 20% from their last peak.
And as UK stocks fell to their lowest since 2005 last week, the jaws of the bear were opening wider.
The last month has seen the FTSE 100 fall by 9%, with the last week alone registering a 3.5% decline. Insurance stocks, particularly those in the FTSE 250, have generally been following suit.
This week has seen a mixed performance amongst the insurance stocks. Biggest riser of the week was AIM-listed LitComp, the litigation services specialist. Its shares soared from 37.5p to a high of over 46p during the week before dropping to 43p as Insurance Times went to press.
The company recently reported an 80% increase in turnover to £6.35m for the full year ended 31 March 2008. Net profit was up 34% to £1.26m in the same period. Investment bank Daniel Stewart & Co gave LitComp a ‘Buy’ recommendation with a target price of 70p, saying that LitComp’s decision to expand into litigation funding was the correct one. It said the demand for litigation funding was increasing, and was likely to accelerate as the economy deteriorated. “Management has made excellent progress. Our forecasts for 2009 put the stock on a forward price/earnings ratio of just 4.6 times. The current market cap is just £2.9m yet net cash at the period end was £3.0m. Take advantage of the weakness,” Daniel Stewart said in a note.
THB Group was one of the biggest fallers of the week, with its shares down nearly 6% for the week.
The broking group’s share price has been slowly heading downwards since the beginning of May, when it was trading at over 80p a share.
This month has seen its stock tumble from around 76p to 66p, after it reported pre-tax profits were down 40% for the year ended 30 April 2008.