Investment Column: Realising Independent's profits

Realising Independent's profits

SINCE COMING to the market in 1993, Independent Insurance has outperformed the market by 350 per cent in a sector that has underperformed by almost 20 per cent. Things have been more volatile recently, though the shares are well above last year's low of 240p.

However, Michael Bright, Independent's chief executive, says the market fails to appreciate that this company is the only UK insurer which makes money on underwriting. It deserves to be re-rated against its peers, he claims.

There's little wonder he's miffed. He took a brave decision six years ago when he pulled Independent out of personal lines to focus the group on commercial business. The move has since been vindicated by Independent's continuing year-on-year profits growth.

Even so, the fact remains that this is the insurance business. However smart Independent is, it will always be at the mercy of the insurance cycle. Rates on some business lines are taking longer to harden than the group expected. The commercial property business is still a war zone.

On the plus side, Independent seems increasingly able to pick and choose its business, which is dropping into its lap following consolidation among brokers and insurance giants. HSBC is holding its full-year pre-tax profits forecast at pounds 66m, putting Independent on a forward p/e of 15. With the interim results in line with forecasts, the shares fell 11.5p to 307p as the market let off steam after the recent rally. The shares are well up with events - take profits.