Highway Insurance Share Discussion Threads

[paddyfool] 24/3/2004 11:19

This article from Insurance review online:

Cox: leaving Lloyds for Highway?
Cox is close to announcing the terms of its all share offer for Highway.

22 Mar 2004, 18:04 GMT - Motor insurance group Cox [COX.L] is in talks to buy smaller rival Highway Insurance [HWY.L] for around GBP70 million. Cox's takeover of Highway, which recently left Lloyds citing high costs, may lead to Cox's abandonment of Lloyds too. It is likely that an increasing number of personal lines companies will start to question the high cost of doing business at Lloyds.

Cox Insurance will soon reveal the details of its offer for smaller rival Highway Insurance in a deal that would create the UK's fifth biggest motor insurer, with a market value of GBP400 million. Last week, Highway said it was considering Cox's offer, but it was too early to say whether it would be accepting.

The terms of the deal must certainly be attractive to Highway shareholders. Cox is believed to be offering one Cox share for every two new Highway shares at about 48p, representing a 30% premium on the Highway's trading price. Moreover, the deal makes financial sense for both companies. Cox chairman Peter Owen believes that the combined unit can achieve cost savings up to GBP20 million. This would mean a significant improvement in profits for the merged entity, given that Cox and Highway achieved profits of GBP51.9 million and GBP21.9 million respectively for 2003.

Yet, the merger may have negative implications for the Lloyds of London market. Highway recently pulled out of Lloyds complaining that the costs of subscribing, at rates of 2.5% to 3%, were prohibitively high. There is therefore some speculation as to whether Cox will continue to place all of its business through Lloyds or whether it will place all future motor business through Highway in the company market.

If it leaves Lloyds, Cox would be one of a stream of personal lines companies to have done so recently. This departure would be especially damaging given that Cox is Lloyds' largest motor syndicate. It would also prompt further debate over the high costs of doing business at Lloyds and raise concerns for the future of personal lines insurers at the London market.

[thecleaner] 22/3/2004 20:01

Cox are worth about 89p, so values HWY @ around 44p each. Not too good, but I son't mind to hold COX as it is also good value. I have shares in both cox and HWY

[factsonly] 22/3/2004 18:51

biomax, 1 cox for 2 hwy sounds about right, see post/msg 85

[biomax] 22/3/2004 08:18

strong buy or what!

Cox Insurance PLC is moving closer to a takeover of Highway Insurance, its smaller rival, in a deal which would create the UK's fifth-biggest motor insurer, with a market value of 400 mln stg, the Financial Times reported.The newspaper did not name its source, but said Cox could announce the terms of its all-share offer this week. It is believed to be offering one Cox share for two new Highway shares!

paper mentioned 48 p, but

1 fro 2 should be more like 60 p

[blackbear] 22/3/2004 08:02

some action today , look's frisky don't it...

[factsonly] 19/3/2004 11:10

rab - the rumoured takeover offer is around 39-40p so we might expect to see it trade a small % below this for a while until a decision/offer is made. In the short-term, the only other reason it might go above 39p is that larger speculators come in believing the offer will be higher or another bidder will enter the fray.

[rogeru] 18/3/2004 22:14

This share should have a lot more interest with whats going on.Why on earth should this be be taken over a this price.Ah well live and hope mgmt isn't taking aa big payoff to sell the company short , its got to be worth at least double mkt value at moment with excellent turnover,profit+divi .
Any thoughts on why price has stayed static??
rab

[spinvest] 18/3/2004 16:46

I cannot believe this has not gone higher - it has got good net assets compared to shareprice and is retaining a huge amount of the profit generated over the last twelve months.

Dividend yield is good and takeover talks occurring.

The fact that Highway is talking to Cox could well result in someone else taking a look, in fact I would be very surprise if they are not all looking!

I am holding at this price and may add if there is any weakness.

[factsonly] 18/3/2004 16:36

Better hope the directors and the board do their job properly and are not drooling over severence packages.

[the drawf] 18/3/2004 07:08

this is a bargain unless they let the company go for a pitence

[thecleaner] 17/3/2004 20:55

This is a bargain. It even has a good divi.

[spinvest] 17/3/2004 10:18

Doubled my stake yesterday.

Can't believe that this has not moved higher on the back of the results.

[this_is_me] 17/3/2004 09:57

Citywire article that I mentioned yesterday:

Hang on to Highway
Published: 11:25 Mon 15 March 2004

Insurance group Highway has just sorted itself out; now larger rival Cox Insurance is hoping to reap the benefits.

Highway shares (HWY) rose 4.75p to 38.25p after the company said it was holding talks with Cox, which is hoping to secure an agreement for an all-share offer.


News of the discussion accompanied Highway's figures for 2003 showing a leap in pre-tax profits from £1.1 million to £21.9 million. The dividend is, however, unchanged with a final 1.68p making a total 2.48p.


Chairman Ross Dunlop said that the reorganisation of the business undertaken in 2002 and initiatives taken since had yielded important savings in operational and claims costs. He pointed to Highway's disciplined underwriting in highly competitive trading conditions.


Highway has completed its exit from the Lloyd's of London market. It has made greater effort to weed out suspect claims - including analysing voice stress - while paying genuine cases quickly.


Dunlop said that instead of accepting risk on a 'seat of the pants' basis, Highway now selected business by running industry statistics and its own experience through a sophisticated computer programme.


Citywire Verdict:


It would not be wrong for shareholders in Highway to take profits but it is reasonable to hope that the directors will hold out for a decent offer given all the work that they have put in to turn the business round.


The likelihood of an all-share offer is a disappointment but it is possible that Cox can be persuaded to put up a cash or part cash alternative to give Highways shareholders the choice of an exit.

Consolidation in the insurance industry is a fact of life and Highway's operations should do better in a larger group. Highway admits that while the premiums it received increased modestly last year, the cost of settling personal industry claims rose 5% and charges for reinsuring its risks soared 20%.


On balance, it is probably right for Highway shareholders to hang on to see what develops. There is just the possibility that another potential bidder could be flushed out while it would not be a disaster if Cox walked away.

[thecleaner] 17/3/2004 08:33

lee99,

If you don't buy you lose. Also look at the interims //
Most of the profit was made in the last six months. That means the real P/E based on last six months === 4 !!!!

[this_is_me] 17/3/2004 00:32

Good write up on citywire; they suggest that it is good takeover or not.

[lee99] 17/3/2004 00:00

I've not looked at insurance comanies before - can someone please explain the reason for the low valuation :-

EPS = 7.5p, Price = 37p, PE = 4.93

Yield = 2.48p (about 6.7%)

[factsonly] 16/3/2004 11:41

If it's true that the deal being offered is only £81m, then I'm going to vote against the deal.

[factsonly] 15/3/2004 18:52

I'm expecting at least 1 Cox share for every 2 HWY shares to be offered. Personally I would like a deal that gives about 50p+ per HWY share.

[pdyke14856] 15/3/2004 13:48

Excuse my ignorance. How does a share buyout work in this case.
I assume we get a number of Cox shares?

[the drawf] 15/3/2004 13:38

100 p or 1.5 cox shares per share would be good enough

[thecleaner] 15/3/2004 13:37

I bought some COX this morning as well just in case they do get it for £70m (which I doubt). The value is already above this. I put a mean valuation on HWY as 60p and wouldn't want to sell for less.

[biomax] 15/3/2004 13:20

50 is too cheap,

if HWY were valued as Cox, then its should have been as high as 140 p

no wonder, Cox is bidding for HWY,

even if Cox offers 100 p for HWY,

they still get bargain relative to their own price

[pdyke14856] 15/3/2004 13:10

V.Pleased at the mo sandbank. Heres hoping for 40p at least or a bid of 50! :-)