FCA General Insurance Pricing Report – Overview
The Financial Conduct Authority (FCA), which is the United Kingdom’s highest financial regulatory body, had launched market research regarding home and motor/auto insurance pricing practices to ascertain the impact on the consumers as well as to understand and support effective competition in the industry, in the month of October 2018. The research was started after a super-complaint was made to the Competition and Markets Authority (CMA) regarding loyalty pricing. The CMA responded to the super-complaint in the month of December 2018, recommending the FCA to identify the ways to work against any harmful business practices that might be undertaken by the home insurance companies. In a thematic review conducted, the FCA assessed around 6 million policyholders paying higher prices and not been given a worthy deal on their policies. If the policyholders who paid larger premiums, only paid the par premium for the risk they had been undertaking, they could have made savings of approximately £1.2 billion annually. The FCA identified that this had an impact on almost all policyholders in the Home and motor insurance segment.
Findings of the Study
The FCA came up with the following key findings:
It was found that the Insurance companies often sold policies at a discounted price to new customers to woo them and then later, at the time of renewal, charging very high premiums and even charging those who are extremely less likely to switch. FCA identified 6 million customers (in 2018), who overpaid for their policies. These holders could have saved £1.2 billion if they had paid what their risk was actually worth. One of the major issues that was identified was the fact that loyal customers, who had been with their insurers for a long time, paid very high premiums for their policies, but some of the customers who had been insured for less than 4 years with their providers, also overpaid. From the holders who had bought building insurance, the lower-income group paid higher margins as compared to the higher income group. It was also identified that the consumers who paid higher, displayed lesser chances of understanding insurance and did not know that if they switched or negotiated, they could have gotten a better deal out of their providers. It was also reported that insurance providing firms were getting into pricing practices that made it extremely difficult for consumers to ascertain the effect that renewing might have on their premiums.
Recommendations from the FCA
The recommendations by the FCA, to be undertaken by the industry in order to tackle the situation of predatory pricing or price talking included the need for the firms to improvement of governance, control and an overall oversight of pricing practices, implementation of the insurance distribution directive and making consumer understand the principles of insurance and how they could benefit from renegotiating their premiums or moving to a new policy provider. The FCA also recommended that there should be continual improvement in transparency and engagement at the time of insurance renewal with the policyholders. In an evaluation of the previous measures undertaken on general insurance pricing, the FCA issued another report, through the evaluation of general insurance renewal transparency intervention, through which the FCA estimates consumer savings of £185 million annually.
Zoetic International Plc
Zoetic International Plc (ZOE), previously known as Highlands Natural Resources Plc, is a Beckenham, United Kingdom based holding company that engages in the development of cannabidiol (CBD) products as well as exploration and development of oil and gas resources through interests in various projects across the world. The company is involved in CBD product operations through its subsidiary Zoetic Organics. The company’s Natural resources interest includes the Colorado Shale, which contains eight wells in East Denver which are currently producing and providing high incomes. The company has a 7.5 per cent working interest in all the 8 wells. The company also has interests in projects in Kansas and Montana. After the company discovered hydrogen-nitrogen gas in western Kansas, the company integrated it with its production of hemp through which it can possibly extract CBD which it sells in both the United States and globally. The company is planning to expand its development operations to 100 acres by 2020.
ZOE Trading Update and Financial Performance
On 4th October 2019, the company announced a trading update for the six months period ended 30th September 2019. The company reported a revenue of £1.15 million in H1 2019, a huge 121.15 per cent year on year increase as compared to the revenue reported in the first half of 2018 at £0.52 million. The company reported that around 67 stores in the United States of America are holding Zoetic and Chill products. The company also reported that they had made a distribution agreement with Mr. Checkout, which is a manger of 13 industry associations having approximately 150,000 independent retail members, for an initial supply to 15 distributors across the United States of America. The company also announced that the production of first feminised hemp seeds would likely happen before the culmination of 2019, with sales anticipated to begin in the first quarter of 2020. It was reported that the outdoor harvest is currently underway. The company also highlighted that the Zoetic UK segment would see expansion into the cosmetics industry before the end of the current financial year. The company reported that it is currently in talks with various entities regarding the sales of its Oil & Gas assets. The company also highlighted that they had a cash balance of £1.0 million as at 30th September 2019.
ZOE Share Performance
On 4th October 2019, at 12:00 PM GMT, while writing, ZOE stock traded at GBX 3.80 per share; an increase of 3.40 per cent or GBX 0.125 in comparison with the previous day’s closing price at GBX 3.675 per share. In day’s trading session, Zoetic International Plc shares traded at a new 52-week low price of GBX 3.24. The stock hit its 52-week high price on October 04, 2018 at GBX 17.85 per share. The market capitalisation of the company has been reported to be around GBP 5.43 million.
4.08 million shares of the company have been traded in the market. The average volume of trading per day for last one year has been 654,410. The stock has shed 78.53 per cent in the last year from the price at GBX 17.70 per share.
The beta of the stock was reportedly at -0.4411, which means that the movement of the stock is inversely correlated with the movement of the comparative benchmark index.
Treatt Plc (TET) is a UK based company that is engaged in the manufacturing of ingredients and solutions and selling them to the Packed food, flavour, fragrance and the consumer goods market. The company’s products are classified into Ingredient Applications, Flavour Ingredients and Fragrance ingredients. The company’ ingredients are applied to various beverages such as coffee, tonic water, juices and other spirits, and similarly, they have some household applications as well.
TET Trading Update
For the year end, the company came up with a trading update on 4th October 2019. The company reported that the revenue for 2019 is expected to be around £112.7 million which will be a year on year increase of 1 per cent (AER basis) as compared to the revenue in 2018. The company mentioned that the revenue has been impacted by the citrus raw material input prices falling down substantially, especially orange oil, which makes up for 33 per cent of the group’s total revenue, plunging by almost 50 per cent in the period. Albeit, the company’s strategy to diversify the portfolio of products paid off as there was 16 per cent growth in the non-citrus based revenue. The company announced that they ended the year with a cash balance of £15.8 million as on 30th September 2019, with £5.8 million net inflow of cash happening during the year.
The company will announce the final results for the year on 26th November 2019.
TET Share Performance
On 4th October 2019, at 1:10 PM GMT, while writing, TET stock traded at GBX 414.00 per share; an increase of 0.98 per cent or GBX 4.00 in comparison with the previous day’s closing price at GBX 410.00 per share. While writing, Treatt Plc shares traded 8.27 per cent above its 52-week low price of GBX 382.37, set on April 04, 2019. The market capitalisation of the company has been reported to be around GBP 241.96 million.
74,070 shares of the company have been traded in the market. The average volume of trading per day for last one year has been 37,060. The stock has declined by 13.75 per cent in the last year from the price at GBX 480.00 per share.
The beta of the stock was reported at 0.3150, which basically means that the movement of the stock is less volatile as compared to the movement of the comparative benchmark index.