Investment: Britannic is streets ahead

ON THE face of it, Britannic Assurance is a dull old door-to- door life insurer from the Midlands, serving those people advertisers like to call the C2s, Ds and Es. Britannic's salespeople still visit their customers to collect cash premiums. It is small-ticket business (perhaps pounds 10 or pounds 20 a month). And the margins are modest. How could this be a tempting investment?

In fact, there are some very good reasons why it is exactly that. First there is the recent takeover of rival London & Manchester by Friends Provident for the very full price of pounds 744m. If other insurers follow the same logic, Britannic will be snapped up.

True, many rivals are puzzled by the big price paid by Friends - even given the unfortunate fact that it was set before the equity markets tumbled. But the deal still gave door-to-door insurers an unfamiliar air of desirability.

Britannic's rivals are struggling. Liverpool Victoria has taken three- quarters of its sales force off the road after discovering they were poorly trained; United Assurance is struggling to rebuild its sales after a huge shake-out.

But Britannic is streets ahead. New business was up 15.6 per cent in the year to June. Its staff have increased their productivity: the man from Britannic now comes equipped with a laptop.

With the benefit of a 7.5 per cent return from pounds 1bn of newly acquired orphan assets, shareholders enjoyed earnings per share up 86 per cent to 84.6p. Operating profit rose 11.2 per cent to pounds 78.2m. Britannic also has the financial strength to weather any more equity market storms.

Britannic shares jumped 48p to 1,281p yesterday, valuing the company at 1.3 times Merrill Lynch's estimate of its book value. Given that London & Manchester was bought for 1.6 times book that's still cheap. Buy.