Five months after Amlin tapped the stock market for cash, investors are asking if they’ll be getting some back.

That is no reflection of shareholders’ confidence in the largest quoted Lloyd’s of London underwriter. Rather, it is a measure of how much the non-life world has changed since the early summer.

First, this autumn’s North Atlantic hurricane season has been one of the most benign in recent years. Serious storms — especially in the US Gulf of Mexico — have been rare, meaning that Amlin and its ilk have capital set aside for insurance claims that they will not have to meet.

The investment climate has been gentler than expected, too. Amlin’s £3.3 billion portfolio has a high weighting in corporate bonds, where spreads against government stock have helpfully narrowed. Together with gains in equities and bonds, Amlin has generated a 5.3 per cent investment return for the ten months to October 31 — what the City had pencilled in for the year as a whole.

The upshot is that KBC Peel Hunt estimates that Amlin has about £500 million of surplus capital — about £200 million of which could find its way back to shareholders.

That is not unfeasible. This month, Lancashire Holdings, a smaller rival, said that it would return $400 million (£240 million) to investors. Besides, Amlin has done so in the past — it handed back £120 million two years ago. Finally, directors’ remuneration is partly pegged to measures of return on equity, such that it is clearly in their interest to maximise the efficiency of Amlin’s balance sheet.

For now, the company merely hints that capital returns are a subject for its full-year results presentation in March, leaving the door open to bolt-on acquisitions in the interim.

The short-term reassurance is that Amlin’s last acquisition, the $350 million purchase of Fortis Corporate Insurance that triggered June’s fundraising, is performing better than expected. Neither does there appear any barrier over time to Amlin raising the underwriting profitability of its newly bought business — previously in the hands of the Dutch Government — closer to its own. Equally, premium rates across the business as a whole continue to move in the right direction — up 4.4 per cent, much in line with the performance at the half-year stage. Amlin observes that rates in UK fleet motor insurance continue to harden, which is encouraging given that other commercial lines usually follow suit.

This year’s strong investment returns will be difficult to repeat. Amlin’s virtues are also reflected in the strength of its shares, which trade at a 40 per cent premium to forecast net tangible assets.

But, at 376½p, or less than seven times next year’s earnings, a prospective dividend yield of 5 per cent and the potential for more to come, buy on weakness.

Moneysupermarket

Hiring an immodest entrepreneur to hawk your wares is not without risk. But it appears to be working for Moneysupermarket.com, the FTSE 250 price comparison website whose advertising campaign is fronted by Peter Jones, of the BBC’s Dragons’ Den. Having reported falling revenues at the half-year stage in insurance, the company’s biggest market, the division’s top line has returned to growth — up 5 per cent year-on-year, or 15 per cent better than June 30. More broadly, Moneysupermarket continues to show steady improvement. The three months to September 30 were its strongest quarter to date. Overall, it remains in line to meet full-year profit forecasts.

Unlike subscription-based web businesses, where revenues tend to lag customer activity, Moneysupermarket offers immediacy: sales reflect the transactions struck through its site. Combined with the effects of this year’s cost-cutting, it is well-placed to benefit from economic recovery, especially from a pick up in housing transactions, whose absence its mortgage-dependent money division continues to feel. The fipside is that Moneysupermarket cannot see too far ahead and that sales remain skewed towards the first few months of the year, when household finances receive their traditional new year makeover. Tempus advised “buy” at 55p in April. At yesterday’s 85p, or 16 times 2010 earnings, and the company sitting on £45 million of cash — even after the payment of October’s £25 million special dividend — hold on for more.

Diploma

Diploma is getting better by degrees. True, yesterday’s full-year results from the specialist distributor showed a 5 per cent fall in pre-tax profits. However, that might be considered commendable, given the operational gearing of its niche: the high fixed costs inherent in holding extensive stocks and running a supply chain, which mean that falling sales have a disproportionate effect on profits. Here, Diploma acted swiftly to mitigate the downturn by reducing staff and cutting inventory levels.

Other measures moved in the right direction. Tighter management of working capital boosted cashflow by a third. Diploma’s coffers filled even more quickly. Net cash rose from £15.7 million to £21.3 million and will increase further with proceeds from yesterday’s announced disposal in the life sciences division.

Diploma’s attraction is a strong presence in some highly specialised but low-profile niches in which competition is relatively weak — everything from medical supplies in Canada to seals for construction equipment. The bigger draw is the discount at which Diploma’s shares trade relative to larger peers, despite offering the same exposure to economic recovery. At 170¼p, or 11 times current-year earnings, and yielding 4.6 per cent, buy.

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