Abbey Protection pins hopes on H2 acquisition

LONDON, Sept 8 (Reuters) - Legal and professional fee insurer Abbey Protection Plc (ABBP.L) is in talks to buy a complementary business, with a deal possibly closing before December, chief executive Colin Davison told Reuters on Monday.

Earlier on Monday, Abbey reported a 13 percent rise in first-half pretax profit to 3.9 million pounds ($6.96 million), whilst revenue ticked up 8 percent to 14.5 million pounds.

The AIM-listed company, which provides insurance protection to small and medium sized companies against legal actions and tax authority investigations, said it was targeting an acquisition between 2 million and 10 million pounds, using cash from its balance sheet.

"It will complement the services we provide already in tax, employment and health and safety, and give us an additional route to market. It is more likely to be a business-to-business target, which will ... help us cross-sell a little better," said Davison.

Abbey listed on the London Stock Exchange's AIM market in November 2007 and has been looking for a suitable business to acquire since the start of the year. It mainly sells through intermediary channels such as insurance brokers at present.

The niche insurance company said it is confident in the company's outlook based on the non-cyclical nature of its products, delivering more stable results than its peers in the wider insurance sector.

On the basis of this growth continuing, Abbey is targeting a full-year dividend of 3.5 pence per share, said Davison after reporting an interim dividend of 1.5 pence per share on Monday.

The company estimates that 25 to 30 percent of UK small-to-medium sized companies have legal or professional insurance.

Abbey is not, however, insulated from the wider economic downturn.

"Companies need our services more when times are hard then when times are good," said Davison, but it might also increase the frequency of claims. (Reporting by Lorraine Turner; Editing by Andy Bruce)