Benfield Share Discussion Threads

[williebiz] 13/2/2008 17:01

Not really, as BFD is pretty much out on a limb with what it does (others compete but tend to be more universal whereas BFD is quite concentrated) plus I really bought into the story, sitting it out for now but always take a keen interest as sooner or later something good or dramatically good is fairly sure to happen.

Don't get me wrong: the bad news might already be in the price and BFD does tend to enjoy a decent P/E ratio.

[charles oliver] 13/2/2008 16:55

Thanks very helpful information. It doesn't look great does it! Perhaps I will just sit in the side and wait for a change in sentiment, could be a long wait! Do you watch any others in this segment?

[williebiz] 13/2/2008 16:46

BFD have been seen as a takeover target for the last year or so and John Coldman is not somebody to take the fall in share price lightly (see the share buyback prog)... TU profit warning

LONDON (ShareCast) - Reinsurance broker Benfield has warned the weak dollar will mean trading profit this year coming in below previous indications while the outlook for 2008 is also uncertain.

Benfield had already flagged problems with weakness of the US dollar and a softening of the reinsurance market. "The impact of these two factors, particularly the further weakening of the dollar, has continued in the second half of the year. Consequently, the board now estimates that reported trading profit for 2007 will be marginally lower than previously indicated, subject to expectations on business streams in the final quarter of 2007 being met," it said.

The outlook for 2008 is again likely to be affected by the weak dollar, it also said, adding that with reinsurance capacity ample in most markets and in the absence of significant global reinsurance losses, Benfield anticipates further softening of rates over the next twelve months.

The downbeat trading comments overshadowed news of £150m share buyback programme over the next two years and a new debt facility of up to £300m.



Warren Buffett's Berkshire Hathaway stoked interest in the reinsurance sector by buying NRG, ING's reinsurance unit, albeit at a €100 million discount to its value on ING's books. Benfield Group, the reinsurance broker seen as a potential predator for Aon, of the United States, edged up 1¾p to 284½p despite a downgrade from Numis, which cut its target price to 245p and its 2008 earnings forecasts by 12 per cent.

Benfield, the reinsurance broker, fell another 13p to 272¼p as ABN Amro, which had stoked recent bid speculation, cut it from "buy" to "hold" following its profit warning last week.

Benfield Group
297¼p -6¾
Questor says Sell

There was disappointment all round when Benfield Group, the world's largest independent reinsurance broker, announce a major share buy-back yesterday.

As it pledged to repurchase up to £150m of stock over the next couple of years, the shares tumbled - and understandably so. Further into its statement was a warning that its profit estimates for 2007 will be "marginally lower than previously indicated".

Benfield generates 42pc of its revenues from the US, so it should come as no surprise that the weak US dollar has taken its toll. In a double whammy, the group has also been hit by falling insurance premiums.

Benfield has arranged a new £300m debt facility to repay its existing debt and to fund the repurchasing strategy; something it likes, having finished a similar scheme earlier this year.

Although the share buy-back plan is designed to help support the shares, it has also dashed bid hopes. This means the FTSE 250 group cannot be in takeover talks - market rumours were that it was in discussions with rival broker Aon.

With a yield of just 4pc, there seems to be little incentive to hold the shares. Of course, takeover rumours could yet come true - Goldman Sach's private equity arm is understood to have looked at taking the group private a few months ago - but that deal apparently failed due to financing difficulties.

A sudden pause in the share buy-back programme would be a key indicator if an approach does emerge, but until then the shares don't deserve to trade at a premium to the sector.



Benfield Group

After a month in which speculation of a bid from Aon, of the United States, has helped shares in Benfield to rise 18 per cent, the attention of investors in the mid-cap insurance broker was returned to more mundane matters yesterday. The £700 million company cautioned that a further weakening of the US dollar since September's interim results and subdued trading would mean that this year's reported trading profits will be "marginally lower" than previously indicated.

Benfield's bind is that it draws three quarters of its sales in US dollars, but, through its presence in the London market, has substantial costs in sterling. Its other problem is that while falling reinsurance rates can be good for business - by stimulating demand, transaction volumes and Benfield's commission income - rates so far have not fallen far enough or fast enough to tempt insurers to lay off more of their risk through the reinsurance market. Benfield expects rates to fall further over the next 12 months, but forecasting at what point insurers might buy reinsurance more heavily is a hazardous business.

The sweetener for investors is that Benfield has agreed a new debt facility of up to £300 million, which gives it scope for a £150 million share buyback over the next two years, its third since floating four years ago. Yet although that leverage brings Benfield's balance sheet more into line with its peers, the benefits of fewer shares in issue can be easily offset by the higher cost of debt. Benfield does best in the wake of big insurance losses, but, in more normal times, the shares, at 297¼p, or 17 times next year's earnings, are likely to languish. No more than a hold.



Speculation that Benfield, the reinsurance broker, could be subject to a bid from rival US giant Aon helped it to buck a falling market.

Benfield rose 2¾p to 281¾p after ABN Amro's Joanna Parsons said that a takeover by the US rival would make it the largest broker in the world, overtaking arch rival Marsh.

"In our view Benfield has reached optimum size and is currently struggling against the dollar/sterling exchange rate and constrained resinurance demand," she said.

In recent months US fund managers such as Harris, Artisan, Deccan and Tradewinds have been buying stock, and they know Aon well, she said.

[charles oliver] 13/2/2008 16:33

Have they reported or any indication of the 1st Jan renewal season numbers, this is likely to be the key indicator for the rest of the year? I probably agree your view on earnings and where they could go, buy interest is in them as a potential target by the likes of an AON.

[williebiz] 13/2/2008 16:22

I follow BFD, I would suggest that they have further to fall: the E of Earnings has fallen off a cliff and forward P/E is still 15x, I reckon we could see that down to 12x in the blink of an eye.

[charles oliver] 13/2/2008 16:18

These have got to be worth a punt, this price is very low and the sector is looking ripe for consolidation. Maybe price brought down due to AIG having suffered. This is a broker though not an Underwriter.

[abcd1234] 27/11/2007 16:22

thats a sharp spike this afternoon in the last 15 mins

[robbo41] 23/7/2007 14:50

I have heard their new computer servicing system has run way over budget and is not very user friendly. Could end up being very costly!!!

[polzeath] 03/7/2007 13:11

Oh b*gger! :-)

[polzeath] 02/7/2007 20:10

Sad to say sold 'em and bought LLOY instead as I need a peaceful summer!

Good luck, holders, I guess you'll do fine now I'm out :-)

[polzeath] 28/6/2007 16:12

Probably just go back up to 335 and stagnate as usual! :-)

[lex1000] 28/6/2007 16:09

.........and polzeath picks another winner!

[polzeath] 28/6/2007 15:53

and higher

[polzeath] 28/6/2007 14:38

Going higher...some bid action brewing here or my middle name's not Imprint :-)

[polzeath] 28/6/2007 12:01

Hiya lex, some big trades going through in the last week or so but no RNSs to explain (other than Artisan's). Something going on here...I'm a bit nervous...base seems to have formed...trading update delayed vs LY...??? ;-)

[lex1000] 28/6/2007 10:57

Polzeath,BFD continues to look good potential.Mentioned o/t AGR on this thread a few days ago.Funny how ones fancy & do not hold go up.Will consider return some trading in & out banking profits in 2008.lol regards lex ;o)

[polzeath] 28/6/2007 07:09

The sudden elevation of climate change to the top of the agenda has led to a huge demand for information and risk modelling, which has benefited Benfield, a company that provides information to insurers on how much they should be paying for reinsurance. "The worse climate change gets, the more indispensable Benfield's information becomes," says Mr Larkin.

[polzeath] 27/6/2007 14:50

Benfield initiated with "buy"

Tuesday, June 26, 2007 6:26:12 AM ET
Seymour Pierce

LONDON, June 26 (newratings.com) - Analyst Gerald Farr of Seymour Pierce initiates coverage of Benfield (BJ8.ETR) with a "buy" rating.

In a research note published this morning, the analyst mentions that the company might post higher-than-expected profits in 2007, despite a weak dollar and a worsening rating environment. Continued M&A activity in the insurance broking area has restricted downside risk to the company's share price, the analyst says.

[polzeath] 27/6/2007 13:37

LY trading update 14 June followed by interims 7 Sept, so trading update is late but one way or another we'll hear more soon. I feel the news is going to be a pleasant surprise to the upside as per the Seymour Pierce buy rec yesterday. But then I'm a positive sort of person.

[polzeath] 26/6/2007 22:36

Benfield Group
June 26th, 2007 | Market whispers | No comments.

Initiated as buy at Seymour Pierce. Broker reckons profits could surprise.

[polzeath] 26/6/2007 17:13

Hope so! A really strange trading day for BFD, 4.3m shares traded which is certainly on the very high side for BFD, could be another RNS out tomorrow, methinks. Here's hoping it's a positive.

[lex1000] 26/6/2007 16:32

Polzeath,yeah think you're onto another winner here! Note bounce off intra lows of 307p-307.25p & AT trades.