City shocked by Hambro Insurance fall: Shares slip to pre-float price as decline in loss-adjusting business hits profits

HAMBRO Insurance Services, which floated in March, has disappointed the market with bad results from its loss-adjusting business.

Cunningham Hart, which contributed more than half of last year's pounds 9.5m profits, suffered a fall in workload as good weather reduced the number of claims passed to the firm by UK insurers. The firm's UK turnover fell by about pounds 1m and first-half profits dropped from pounds 1.8m to pounds 400,000.

HIS shares dropped from 165p to 118p, 20p below the price at which it came to the market.

Martin Green, an analyst at Smith New Court, said: 'It leaves a bad taste in the mouth. It was the loss-adjusting side that everybody thought was a nice, core, stable business. Nobody was expecting it to be this geared (to the fall in claims).'

Christopher Sporborg, the chairman of HIS, said the stock market had over-reacted 'quite ridiculously'. He added: 'Anyone would have thought we'd halved the dividend and made a thundering loss.'

Mr Sporborg laid part of the blame on Stock Exchange rules that limit what companies can tell analysts without making a full announcement.

Cunningham Hart has received incoming claims of about 4,600 a month, down from 5,200 a year ago. To achieve planned savings of pounds 700,000 a year, it has made 46 of its 500 employees redundant.

HIS tried to signal its continued confidence in its prospects by paying an interim dividend of 1.85p - a notional 7 per cent increase on the amount it would have paid if it had been listed last year.

Nicholas Page, the managing director of HIS, said loss-adjusting was a seasonal business and he could not remember a year when the second half was not more profitable than the first.

Mr Green said full-year forecasts for HIS have been cut from pounds 11m to pounds 7m.

The group's interim pre-tax profits fell from pounds 4m to pounds 3.25m following the setback at Cunningham Hart. Hambro Legal Protection, which arranges insurance for legal expenses and runs accident and medical helplines, increased its profits by 29 per cent to pounds 2.1m.

Beale Dobie, which makes a market in second-hand life insurance savings policies, increased profits by 9 per cent to pounds 567,000, on sales up 29 per cent to pounds 8.1m.