The Investment Column: Sedgwick figures reassure market

DOOM and gloom has surrounded the insurance broking market for the last few years but Sedgwick yesterday gave hope that there may be light at the end of the tunnel.

What used to be meat and drink to Sedgwick - commission income for arranging insurance for corporations - is beginning to look like crumbs from the corporate table. Many multinationals prefer to self-insure. Meanwhile, two giant American predators, Aon and Marsh & McLennan, are lying in wait.

Against that background, Sedgwick managed to increase underlying profits by an impressive 19 per cent. Although the strong pound restricted profits to pounds 101.2m, or 6 per cent.

Sedgwick's strategy of shifting away from dwindling commission income to fees appears to be working. Noble Lowndes, the big UK benefit consultants, now makes up a quarter of the group's profits and last year saw a 14 per cent growth in income. Sedgwick has also proved adept at moving into emerging markets and also claims to have become the biggest insurance broker in Eastern Europe.

The illusive merger between Sedgwick and Willis Corroon remains just that. Sax Riley, the chairman of Sedgwick, points out that, as with accountancy mergers, clients may not always be happy. And Willis Corroon last week made it clear it was determined to remain independent.

Even so, Sedgwick should be able to continue to improve earnings and dividends at a decent rate. Its results pleased the market, causing its shares to rise 5p to 146p yesterday. Analysts forecast earnings per share rising from 12.8p to 13.4p this year, putting the company on a forward p/e ratio of under 11. With a yield of 4.8 per cent to underpin the price, the shares are beginning to look attractive.