STM warns on profits over 'uncollectable' policy fees

Financial services company STM Group warned investors that full-year profits would be hampered by "uncollectable policy fees" and softer-than-expected new business wins in one of its insurance divisions.

The AIM-listed outfit's life insurance unit, STM Life Assurance, was hit with several one-off charges during the second half of the year - including £200,000 worth of fees it said were uncollectable and £100,000 associated with cancellations of uneconomical policies.

STM also reduced its new business forecast by £200,000 as a result of a timing delay in multiple policies.

However, STM noted that aforementioned would be partially offset by £500,000 worth of reserves releases in the fourth quarter.

Management said it anticipates the release of a technical reserve to provide a "significant positive contribution to earnings, as it has done in previous years", to allow an overall profit before tax for 2018 in line with its previous expectations, with underlying profits excluding the impact of profits from reserve releases and one off costs expected to increase year on year.

Chief executive Alan Kentish, said: "The year so far has seen significant change, and it is apparent that we have experienced a number of material one-off costs as well as ongoing costs as part of our enhanced governance, both of which will impact our profitability but make our businesses more robust."

"Despite these headwinds, the growth in our underlying business and the anticipated release of the technical reserve mean we remain confident of being in line with management's expectations of overall profit before tax for the full year."

As of 0920 GMT, STM shares had dropped 7.83% to 53p.