Compensation shake-up set to boost accident victims adviser
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INSURERS were dismayed last week after the Government announced a change in the way compensation payments should be calculated in life-changing personal injury claims. The precise repercussions are yet to be revealed, but analysts suggest the move could boost payouts by at least 80 per cent over time.
Amid much wailing and gnashing of teeth from the insurance industry, one firm is expected to benefit from the change – Frenkel Topping, a small, oddlynamed business that specialises in managing money for victims of catastrophic accidents.
Frenkel shares are 61½p and should increase materially over the next few years, not only in response to changes in compensation payments but also because the group is in the throes of a transformation under chairman Jason Granite.
Frenkel Topping was founded in 1980 by two accountants, Michael Topping and John Frenkel. Their names live on but they have not been involved in the business for years. The company floated in 2004 and built a reputation for advising victims of life-changing incidents and their families.
Then, at the end of 2015, Granite arrived. A former investment banker, turnaround specialist and hedge fund owner, Granite now runs a private investment firm, FCFM, where billionaire businessman Michael Spencer is the second-largest shareholder.
Spotting potential at Frenkel Topping, Granite and Spencer have acquired more than 17 per cent of the shares, while Granite has initiated several significant changes at the company, designed to help customers and boost the bottom line.
Most importantly, the group has begun to manage customers’ money, rather than just advise them on what to do with it. This has three implications. First, customers now have to pay considerably less to have their money managed than they did when it was handled by external investment managers. Second, Frenkel Topping focuses exclusively on helping the victims of tragic accidents, so it is best placed to manage their cash in a way that ensures they have the annual funds they need to make the best of their lives. Third, bringing fund management in-house boosts its profits. Results for 2016 will be announced in a couple of weeks and are expected to show profits of £1.5million with a dividend of 1.1p. In the current year however, profits of at least £3.4 million are expected, with more than £4million pencilled in for 2018. Both these figures were revised upwards last week, following the compensation ruling – and dividends, currently expected at 1.3p this year and 1.6p next, may increase as well. Each year, about £2 billion is paid out to the victims of catastrophic injuries – caused by medical negligence or accidents. In each case, the lives of victims and their families are changed forever and compensation is vital to support them and finance everything from carers to stairlifts to special education.
Following the compensation ruling, the sums are expected to rise to between £3billion and £4 billion annually.
Frenkel currently has around 1,000 clients, whose assets amount to about £750million. This year, it is likely to gain about 100 new customers, whose awards were expected to average £750,000 but may be nearer £1,000,000 now.
And, while insurers bemoan the change in the law, Granite points out that, for victims of accidents – left paraplegic, brain damaged or similarly afflicted – the recent ruling means that they will now receive the compensation they deserve which can make a meaningful difference to their quality of life.
Midas verdict: Jason Granite may not seem the typical chairman of a small company like Frenkel Topping, which focuses on helping vulnerable people make the best of tragic situations and has historically been viewed as rather sleepy. But he is determined to improve customers’ lives and shareholder returns, and seems eminently capable of both.
The shares rose after last week’s ruling but, at 61½p, there is still plenty of potential.
Traded on: AIM Ticker: FEN Contact: frenkeltopping.co.uk or 0161 886 8000
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