Independent Insurance to issue pathfinder

INDEPENDENT Insurance will publish its pathfinder prospectus tomorrow, the next step towards becoming the first general insurer to obtain a stock market quote since the Second World War.

Independent has remained profitable throughout 1990-1992, when the insurance industry suffered appalling losses. The company should command a premium price relative to the much larger composite insurers, and hopes to have a market value of pounds 85m- pounds 100m.

However, Steven Bird, insurance analyst at Smith New Court, believes Independent may be six months too late with its flotation to command the best prices, although he still expects Independent to fetch a price 30 or 40 per cent higher than net asset value.

Independent delayed its flotation because of heavy losses on providing stop-loss insurance for the Lloyd's market. It has spent pounds 2.2m on reinsurance to cap its liability, taking the total cost to more than pounds 14m.

Michael Bright, chief executive, is confident that underwriting procedures worked correctly - he just made a bad decision to take on the stop-loss business. Lazards, Independent's merchant bankers, sought assurances that the company did not face similar problems in other parts of its business. R Watson, the actuarial consultancy, has reviewed the reserves and concluded they are prudent and soundly based.

Independent intends to raise about pounds 25m in the float to support its rapid increase in premium income. It made an interim pre-tax profit of pounds 4.3m, despite the last pounds 5.2m of the stop-loss provision.

Mr Bright and his colleagues took control of Independent in 1987 after a management buy-in of the UK arm of Allstate, the large US insurer. The largest shareholders include Foreign & Colonial and 3i.