First-half growth at Litcomp
Article Date: Dec 18 2008After-the-event insurer Litcomp has increased interim pre-tax profits 154 per cent to
£877,000.
The Grantham-based company’s core legal expenses insurance arm, Elite Insurance,
more than trebled gross written premiums to £15.7 million in the six months to September, though it doubled the amount ceded to reinsurers to £1.6 million. AIM-quoted Litcomp, a provider of medico-legal reports and litigation services steered by chief executive officer Jason Smart, had to bear a hefty fivefold increase in fees and commissions to £11.1 million, while net commissions and benefits paid rose 70 per cent to £1.2 million.
Elite’s own nearly doubled pre-tax profit of £1.5 million dwarfed the group total but showed lower margins than in the previous first half because of one hefty deal in which the company accepted a ‘very low margin’ because it perceived a ‘very low claims risk’, says chairman Douglas Smith. As from April, Elite negotiated new reinsurance treaties, which have increased the claims liability risk retained by the company while increasing its share of gross premiums.
Smith says delays in litigation caused by claimants’ funding problems are now ‘constraining’ Elite’s growth, but sees this problem being eased in 2009 by ‘a number of new funders’ entering the market. With much of its business of a ‘long-tail’ nature, whereby claims could take years to materialise, Elite has to reserve conservatively for these risks.
The chairman concedes that a 7.5 per cent increase in medico-legal reporting turnover to £868,000 was ‘disappointing’, but cites measures now being taken to stimulate this business. Floated at 61p in 2006, Litcomp shares have fallen from 83.5p in that year to 35.5p now, valuing the company at £2.2 million.
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