Car insurers hit the skids amid warnings that they face a battle to remain profitable as drivers return to the roads. Even before the pandemic, the industry had been moaning about the rising cost of car repairs and higher personal injury payouts after changes to the Ogden discount rate.
Last year’s lockdowns gave insurers a bit of breathing room, as people made far fewer trips which led to fewer accidents. But with the end of lockdown in sight and people no longer confined to their homes, the number of journeys is expected to pick up again over the summer.
Alongside bigger compensation claims, premiums are coming under pressure after the Financial Conduct Authority warned them against penalising loyal customers.
Analysts at AM Best, the US credit ratings agency that focuses on insurance, say that the combination will put a “dent” in performance this year. “As car usage returns to pre-lockdown levels, falling rates against a backdrop of claims inflation will likely lead to underwriting losses.”
Although its main concern is with motor insurers, the agency said that the wider British non-life insurance sector also “remains relatively weak”.
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The note knocked some of Britain’s biggest insurers yesterday. Direct Line, owner of Churchill and Green Flag, slipped 16¼p, or 5.1 per cent, to 306p; Hiscox, which insures classic cars, reversed 30p, or 3.4 per cent, to 858¾p; and Aviva shed 13p, or 3.1 per cent, to 407½p. Moneysupermarket, the price comparison group, was caught in the crossfire as it slipped 8¼p, or 2.9 per cent, to 271¾p.
Despite the insurers’ struggles, London’s recent march continued. The FTSE 100, home to Britain’s biggest listed companies, rose for the fourth consecutive day to close up 56.90 points, or 0.8 per cent, at 6,942.22 — its highest since the end of February last year, when global stock markets started to crash.
A tier below, the FTSE 250, whose constituents have more of a domestic bias, moved deeper into record territory as it added another 86.97 points, or 0.4 per cent, to 22,247.54.
Despite all the palaver about the safety of its vaccine, AstraZeneca pushed 144p, or 2.0 per cent, higher to £72.43. Analysts at UBS reiterated their “buy” rating and urged investors to “look beyond the vaccine noise”, especially given that the jab is being made on a not-for-profit basis.
Stocks that are generally sought for their income, such as food and beverage companies and tobacco groups, fared well as bond yields eased lower, making their dividends more appealing. Diageo, the biggest spirits maker, rose 96½p, or 3.1 per cent, to £31.87; British American Tobacco, maker of Dunhill cigarettes, puffed 83½p, or 3 per cent, higher to £28.58; and Reckitt Benckiser, the consumer goods group behind the Air Wick and Dettol brands, improved 175p, or 2.7 per cent, to £66.41.
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Shares in Lookers, one of Britain’s biggest car dealerships, revved 9p, or 14.4 per cent, higher to 71½p after it boasted that this year’s profits would be “materially ahead” of expectations. Despite its dealerships being closed for most of the period, it sold 44,000 cars in the first three months of 2021, only 5,000 fewer than it did in the same period a year ago. Analysts at Peel Hunt, the stockbroker, increased their full-year profit forecasts by £10 million to £34.8 million.
Elsewhere, recruiters got a lift from industry data that showed the first rise in permanent staff appointments since December. Page Group gained 14¾p, or 3.1 per cent, to 500½p and Hays, its bigger rival, put on 3½p, or 2.2 per cent, to 158¼p.
Web hoster goes to Daddy
Go Daddy, the Nasdaq-listed web hosting group, has agreed to buy the assets of Minds + Machines, its much smaller UK peer, for $120 million.
Minds + Machines sells domain names — the bits at the end of a website’s address. Among the most common are .com and co.uk, but Minds + Machines deals with more specialist names, such as .beer, .law and .xxx.
That will leave the company as a cash shell.
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The offer works out to about 8¾p per share, almost double what they were changing hands for at the start of the week and before Go Daddy’s interest was known.
The deal has the backing of management and leading shareholders who, between them, control 64 per cent of the business. Tony Farrow, chief executive, said there was a “strong strategic rationale” to sell to Go Daddy.
He added: “Without significant capital investments, we expect our growth to be in line with the industry generally.”
Farrow took over last October after long-serving boss Toby Hall resigned, after an accounting mistake in which revenue was incorrectly recognised. Minds + Machines shares leapt 2¾p, or 59.8 per cent, to 7¼p yesterday.
Wall Street report
Falling Treasury yields after softer-than-expected labour market data pushed the S&P 500 to another record with a gain of 17.22 points, or 0.4 per cent, to 4,097.17. The Dow Jones industrial average rose 57.31 points, or 0.2 per cent, to 33,503.57.