Gable Holdings: Will new 5 year contract agreement transform the business?

Gable Holdings has just announced that it has signed a £70 million 5-year agreement with Towergate Underwriting. Gable will act as preferred insurer, providing commercial insurance products to Towergate’s UK clients from January 2013 and is projected to result in a minimum of £14m per annum gross written premiums.

Towergate is the UK’s largest Managing General Agent (MGA) and this agreement represents a major step forward for Gable. To put the expected £14m per annum premiums in context, in 2011 Gable recorded gross written premiums of £29.8m and in the first half of the current year, £15.4m. On current earnings forecasts of 7.4p in 2013 the shares are only on 5.4x. There should be substantial upgrades to these forecasts which I will update later. The share price is up nearly 20% since purchase in early October but I would expect the share price to make further progress over and above the 5% move this morning.

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