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UPDATE - Brightside Group lowers 2013 earnings estimate as online business hit

Last updated: 11:04 16 Dec 2013 GMT, First published: 12:04 16 Dec 2013 GMT

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UK insurance broker Brightside Group (LON:BRT) has lowered its earnings estimate for 2013 as its online business is further constrained by capacity difficulties.

Notably, this reduction in capacity has been particularly felt from insurer Southern Rock Insurance, it said.

As reported earlier this year the firm was struggling to expand the panel of underwriters for its online business and get commitments to expand capacity during the Markerstudy bid process.

"Taking into account the corresponding impact on premium finance volumes, the directors have reduced their 2013 earnings estimate by approximately 20%," it said in Monday's trading statement.

However, Brightside did say that it had "substantial" increases in capacity available to its online offerings for 2014, from a range of sources including mainstream carriers and specialist underwriters.

"To supplement this, the directors continue to work to achieve a position where the group is not overly reliant on any single insurer," it added.

The firm told investors that increased capacity together with continued strong performance within the off line retail broking units indicated a 2014 forecast consistent with market estimates.

House broker finnCap notes that as the online division represents the group’s growth engine, the transition period has been "uncomfortable".

However, it highlights that the reduction in underwriting exposure to Southern Rock will decline from 65% of capacity in H1 to almost nothing for full year 2014.

Replacing this is indicated capacity from established insurance groups, including Aviva, which will see overall capacity lift 25% to £145mln, says analyst Duncan Hall.

"As a consequence, the group will have a much broader active underwriting business base, which should enhance the overall value of the enterprise," he says, targeting a price of 25p on the shares.

Shares dipped around 12% to 17p on Monday.

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