Why the rush to market?

All of a sudden, insurance groups are falling in love with the stock market. Saga, the over-50s holidays group which actually makes the majority of its profits from insurance, is drawing up plans for a float valuing it at more than £2.5bn.

Hargreaves Lansdown, the life insurance and investment broker launched by two accountants in a bedroom 25 years ago is coming to market next month.

And Xchanging, the business process outsourcing specialist that famously helps Lloyd's efforts to manage the two jumbo jets worth of documents that travel between Lime Street and Lloyd's back offices in Chatham and Folkestone each year, is also taking the plunge. What is the explanation for this sudden urge to be publicly quoted?

Actually, it probably does not have a great deal to do with insurance. Flotation is just another way of selling a business, and timing is everything.

While one can hardly accuse Stephen Lansdown and Peter Hargreaves of opportunism when it has taken them 26 years to bring their company to market, the other two examples are companies that are owned by private equity groups who always have an eye for an exit.

And while Lansdown stresses that "you don't float a company because it is an opportune or inopportune time", actually, most companies do. After all, it makes rather a big difference to the ability to get a float away at the valuation that makes it all worthwhile.

Despite the turbulence earlier this year, London financial markets are still enjoying a prolonged boom; the question is how long it will last. Every boom brings a rush to market, which then ends suddenly when the global economic environment changes.

When the music stops, it always catches out a few unfortunate companies in the middle of the flotation process.

So it's considered best to get on with it while the going's good, particularly when the market is nervously eyeing the troubles in America's sub-prime mortgage market and wondering whether it might have a contagious effect on other financial sectors.

The bigger question is how will this rush to float affect the ongoing consolidation of Britain's shrinking army of brokers.

Research from consultants JCL Haslam shows that 80 broker takeovers were completed in the UK last year, and the trend has continued this year with AXA busily buying brokers such as Layton Blackham, Stuart Alexander and Smart & Cook, which itself has snapped up more than 50 brokers since 1990.

Other foreign buyers, such as OAMPS UK, the British arm of Australia's third largest broker group, are looking to make UK buys. Six potential suitors, including a major European investment bank, are in the market for niche payment protection plan broker British Insurance.

Leading commercial lines consolidators such as Towergate and Oval are also continuing to buy other brokers. But some of these players are partly owned by investment houses themselves. Oval, for example, is widely regarded as planning to float before 2010 to allow Caledonian Investments to realise some profits.

The question is whether the rush to market by other insurers and brokers will spur some of the consolidators to take the plunge themselves.

By raising cash and giving them an acquisition currency, this could have the effect of speeding up the feverish consolidation of UK brokers even further. IT

Andrew Cave is the former associate City editor of The Daily Telegraph