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Why Charles Taylor’s results were better than the market thought
All told 2017 was a tough year for the insurance industry but this presented opportunities for Charles Taylor (CTR). As the sector struggled with technical innovation, Charles Taylor continued to build its capabilities as a provider of professional services to the insurance industry.
Existing in one form or another since the mid-19th century, Charles Taylor has three main areas of business.
It loss adjusting arm is commissioned by insurers to estimate the costs of pay-outs across aviation, energy and marine markets.
The management services division earns fees for running pooled insurance funds for industry groups. It runs the Standard Club, which insures around 10% of the world’s shipping fleets.
The company has recently made major investments into InsureTech, its digital platform. The insurance sector has suffered from a failure
to adapt to using technical innovation to reduce costs and increase efficiencies. InsureTech seeks to address this.
The company’s CEO David Marrock attributes a 31.3% drop in statutory profit for 2017 to costs arising from the InsureTech investment and acquisitions made during the year. He says these
do not ‘relate to the underlying performance’ of the company and are therefore stripped out.
On an adjusted basis, the company’s profit was up 3.5% to £15.3m although its share price took a hit after results were released on 14 March. The company states this was due to confusion over the reasons behind the adjustments and, in this context, it is worth noting a 5% hike in the full year dividend to 11p.
BUILDING OUT THE BUSINESS
Charles Taylor acquired Criterion Adjusters in 2017, a loss adjusting business focused on high net worth individuals.
It also bulked up its US third party administrator business with the purchase of workers compensation claims administrator Metro
It already manages all the workers’ claims for its client Signal Mutual, the largest provider of this type of service to the US maritime industry.
The company’s acquisition of a closed book of Zurich International portfolio bonds boosted the company’s ability to generate fund management revenue and saw it enter the fund administration services market.
The company has also been branching out internationally, It is working with a company called Fadata as part of its tech strategy.
Justin Bates, analyst at broker Liberum, is excited by the company’s prospects. He upgrades his 2018 adjusting services profit forecast by 20% to £4.3m with a resulting 2% hike for its 2018 earnings per share forecast to 22.6p.
At 257p and based on this forecast the shares trade on an undemanding price to earnings ratio of 11.3 times. (DS)