Smaller Companies: Get a flying start with GoshawK

LLOYD'S OF LONDON has always been an obstinately difficult animal to understand, writes Richard Phillips. Perhaps that's one reason why so many names were fleeced of their money so easily in the Eighties. And although the market's problems have eased in recent years, there are still difficulties looming on the horizon. One of the major changes has been the advent of quoted vehicles whose business is insurance at Lloyd's. The first of these was the Lloyd's investment trusts, which have had a mixed performance.

Another is the pure insurance groups - combining managing agencies and underwriting syndicates.

Chief of these are Cox, Wellington, Angerstein and GoshawK. The latter only secured an AIM listing in late 1996, and has since transferred to the main market. Since then, GoshawK's shares have risen an unexacting 15.5p to 125.5p.

On a measure of the premium over adjusted net assets - balance sheet NAV plus open year income - GoshawK is also a late developer. At the end of January, according to figures produced by GoshawK, Cox Insurance Holdings' share enjoyed a 122 per cent premium over adjusted net asset value, Wellington an 84 per cent premium. Contrast that with the meagre 19 per cent premium for GoshawK's share, when it was 123.5p.

More immediately, Lloyd's pundits will recognise the likelihood of an impending downturn in the underwriting cycle.

GoshawK has decided to reduce capacity, thereby hopefully maintaining profitability through the next rough patch.

The shares look like a cheap and potentially profitable way into Lloyd's.