Insurance broker Brightside (BRT:AIM) losses more than a fifth of its value on its second profit warning since July. The vehicle and commercial broker plummets 22.5% to 15p on news that this year’s earnings will be 20% below expectations.
This followed hints during the summer (31 July) that policy volumes would be hit by underwriting capacity limitations in its online business.
Brightside received a 27p takeover approach during the summer from underwriter Markerstudy. Talks ended without a firm offer being made after a downwardly-revised proposal for a 20p to 22p per share offer was rejected by Brightside (10 Sep).
Next year could be a different story for the Bristol-based broker. Following Martyn Holman’s resignation (18 Sep) the group welcomes Paul Williams as its new boss after almost a decade at insurance intermediary giant Towergate.
Brightside has secured a new panel of underwriters for the business to reduce its reliance on Southern Rock. Its overall capacity is set for a 25% boost next year to £145 million after names such as Ageas (AGS:BR), Aviva (AV.), AXA (CS.PA) and RSA (RSA) agreed to support the business.
House broker Finncap leaves its 2014 estimates unchanged because of the extra capacity in Brightside's online business. It says: 'Anticipated policy count growth in 2014 should counter some of the effect of soft motor insurance markets, but as new insurance partner arrangements will need time to bed in, we leave 2014 estimates unchanged.'
Finncap analyst Duncan Hall comments: 'With the online division representing the group’s growth engine, the transition period has been uncomfortable. The impact of new arrangements will become easier to assess by the second half of 2014. Regulatory oversight still pervades the sector and logically these are probably the darkest hours for the group. With a broader insurance panel, the commercial risk from dependence on Southern Rock is removed and the converse of the downgrade is that the benefit to earnings of any future increase in motor insurance premiums is clear to see.'