Motor-focused insurer esure (ESUR), which floated in March at 290p a share, delivered a decent half-year performance - its combined ratio (of claims to premiums) improved by 4.8 percentage points to a solidly profitable 89.6 per cent. But motor rates are falling, while long-term prospects for esure's female-focused Sheila's Wheels business remain uncertain following December's legal ruling, which enforced gender-neutral pricing.
Management points to softening motor pricing, but won't quantify that - except to say that esure's rating pressures overall aren't as grim as those in the wider market. According to the AA, UK motor rates in the second quarter fell on average by 9.8 per cent year on year - so esure's relative resilience deserves credit. Some of that resilience reflects a decent performance at Shelia's Wheels - measures such as growing the younger female driver book (where rates are firmer) in advance of the ruling, helped. But, following the ruling, it's unclear whether Sheila's Wheels will maintain its long-term edge. Certainly, the brand's associations with female drivers will help, as will the existing heavy female focus, but those advantages could erode.
The investment book, meanwhile, is almost entirely focused on safe-looking bonds and cash - that low-risk approach meant a slender 1.1 per cent return.
Broker Oriel Securities expects adjusted full-year EPS of 21.4p (22p in 2012), a 14.3p dividend and net tangible assets of 61p.
ESURE (ESUR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 287.9p | MARKET VALUE: | £3.46bn | |
| TOUCH: | 287.4-288p | 12-MONTH HIGH: | 338p | LOW: 285p |
| DIVIDEND YIELD: | 0.6%* | PE RATIO: | 13** | |
| NET ASSET VALUE: | 56p | COMBINED RATIO: | 89.6% | |
| Half-year to 30 Jun | Net premiums (£m) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 235 | 49.4 | 15.0 | nil*** |
| 2013 | 240 | 56.9 | 7.5 | 1.80* |
| % change | +2 | +15 | -50 | - |
Ex-div: 4 Sep Payment: 18 Oct *Excludes 0.7p special dividend **Based on pro-forma earnings ***Prior to flotation | ||||
