MARKET REPORT: Insurance shares slump over fears of price curbs

Investors in insurance firms were spooked by reports that the financial watchdog is piling pressure on the industry to offer more affordable prices.

The Financial Conduct Authority’s head of insurance Matt Brewis said premium finance, where customers pay in instalments rather than up front, is a ‘poor product’.

He told trade website Insurance Post: ‘It is a tax on being poor. Those who are paying monthly are subsidising those who can afford to pay annually.’

The comments weighed on London-listed insurers. Direct Line fell 7.5 per cent, or 13.4p, to 166.15p, Admiral dropped 5.6 per cent, or 153p, to 2569p, and Hiscox slid by 1.7 per cent, or 18p, to 1041p.

Beazley gave up 2.9 per cent, or 15.5p, to 512.5p and Lancashire Holdings fell 1 per cent, or 6p, to 600p.

Price push: The Financial Conduct Authority’s head of insurance Matt Brewis said premium finance, where customers pay in instalments rather than up front, is a ‘poor product’

Thomas Bateman, an analyst at Berenberg, said there could be changes to the way insurers price this product.

He said: ‘On first look, premium finance, which has an APR of around 15 per cent on average, is high given the level of inherent credit risk, although potentially not too high when compared with alternative forms of finance such as credit cards.

‘However, the annual percentage rate charged by each insurer can vary hugely, with some in the 40s, and we believe it is these outliers where the FCA is focused.’

The FTSE 100 fell 0.42 per cent, or 32.20 points, to 7651.76 while the FTSE 250 dipped 0.07 per cent, or 13.94 points, to 19,280.08.

A drug made by pharma giant GSK to treat severe asthma in teenagers and adults has been approved in China, but its shares fell 0.3 per cent. or 5.4p to 1570.8p.

Estate agents Property Franchise Group and Belvoir have agreed a merger that would create a combined group valued at around £214.4million.

The deal received a mixed reception, however, with Property Franchise down 4.1 per cent, or 14p, to 330p while Belvoir dipped 0.2 per cent, or 0.5p, to 256p.

Stock Watch –  Marks Electrical

Marks Electrical plunged after booming sales failed to translate into profits.

Full-year revenues are expected to rise as high as £118million in the 12 months to the end of March, from £97.8million last time around.

But profits are set to fall from £7.5million to between £5million and £6million.

Founder and chief executive Mark Smithson said he was ‘frustrated’ as pressure on prices meant he was unable to boost profit margins.

The shares fell 24.6 per cent, or 22.5p, to 69p.

Costain was on the rise – up 9 per cent, or 5.6p, to 68.2p – after the construction and engineering firm won a contract with Northumbrian Water Group, worth up to £670million over a 12-year period.

Vimto maker Nichols’ revenues rose 3.5 per cent to £170.7million last year driven by strong sales in its international division which sells Vimto to more than 73 countries.

It expects its profit for 2023 to have beaten market forecasts. Shares climbed by 0.9 per cent, or 10p, to 1140p.

Energy services provider Hunting gained 2.4 per cent, or 6.5p, to 280.5p after ending last year with record orders at around £452million.

Gym Group added 1.7 per cent, or 1.8p, to 107p as it cashed in on more people buying memberships, and says it plans to open ten to 12 sites in 2024.

Christmas trading went to plan for Pro Cook with the cookware retailer’s third-quarter results showing revenues rose 3 per cent to £23.1million in the 12 weeks to January 7. It gained 7.7 per cent, or 2p, to 28p.

Profits at Hostelworld beat forecasts following record revenue and bookings for the online travel agent in 2023, lifting it 8.7 per cent, or 11.5p, to 144.5p.

And bumper trading over Christmas helped bar owner Nightcap to record its highest monthly revenue in December since it floated. Shares soared 9.7 per cent, or 0.5p, to 5.65p.

A business owned by Sanderson Design Group has signed its third major licensing deal.

As part of the five-year agreement, the luxury interior furnishings company’s Morris & Co brand will exclusively make bed linen, bath linen and tote bags for the New York homewares company Envogue.

Sanderson shares rose 2.1 per cent, or 2.5p, to 121.5p.