With Michael Faulkner
The insurance sector has enjoyed a bounce this week. Insurance stocks have taken a bit of a battering over the last few months, dragged down by the bruised banking sector stocks.
But as results season gets underway it has become apparent to investors that the insurance sector is still generating good returns, unlike some of their banking cousins. Lloyd’s insurer Advent was the week’s strongest performer, its shares rocketing over 23% in value. The share price has been racing upwards since the company’s board last week rejected a £67m bid from equity firm Fairfax for the business.
Advent said the 165p a share offer – equivalent to 69% of net tangible assets per share – materially undervalued the business. With traders expecting that Fairfax would come back with a better offer, Advent’s shares soared to 225p as Insurance Times went to press.
In contrast, broking group Cobra’s stock plummeted this week after the company announced that it had ended discussions with a potential buyer. Shares in Cobra had reached 115p after the company said last month that an approach had been made. On the news that the talks were off, the stock crashed to less than 78p.
Cobra’s stock has been rather limp since the company listed on the Alternative Investment Market (AIM) just over year ago. Traders were clearly hopeful that an acquirer would pay a premium for the business given the high price paid by Towergate for the Broker Network at the end of last year. It was not clear why the talks fell through, although Steve Burrows, Cobra chief executive, has said talks could start up again in the future.
On the London Stock Exchange, the main general insurance stocks performed well. Brit Insurance Holdings, which has had a rather torrid quarter in terms of share price performance, was the biggest riser this week. The company’s stock was up 10% over the last seven days, trading at 188.25p as Insurance Times went to press.
Since April, Brit’s share price has fallen from its six-month high of over 260p to a low of 150p.