Management of niche insurer Gable (GAH:AIM) is considering selling the business as it needs an injection of cash. Shares in the business lost a quarter of their value after management admitted that losses for 2015 will be heavier than expected, sending the stock spinning 24% lower to 5.1p.
The share price had peaked at 87p roughly two years ago, then valuing the business at close to £120 million. Today Gable is worth just £7.1 million.
A big part of its problems stem from a lack of funding. This has not been helped after one client, that had bought a policy covering possible litigation costs, accepted a court case settlement which failed to cover its legal expenses, leaving Gable to pick up a mult-million pound tab.
A source at Gable says that the company will contest the settlement. It is claimed that the plaintiff did not ask for the group’s consent to agree to such a settlement.
Losses for 2015 are now expected to be around £6 million higher at around £14 million. No date has been set for when these figures will be posted.
The possibility of selling Gable has also been sparked by management’s struggle to raise sufficient capital to meet the European Union’s minimum capital requirement, known as Solvency II, before the 31 December 2017 deadline.
Under the directive an insurer has to keep a minimum 100% of its liabilities as cash in reserve to avoid a potential banking-style bail-out.
A strategic review has been launched and management confirm that they are speaking to several parties regarding its options.
Management remain upbeat pointing to the group experiencing ‘high levels’ of policy renewals, yet gave no figures.
FinnCap is reviewing its forecasts.
Gable insurers niche product lines such as goods in transit in Europe, including the UK, France and Germany.