Motor-focused insurer esure's (ESUR) full-year earnings were helped by reserve releases, reflecting an improved claims backdrop. That helped bolster the combined ratio (of claims to premiums) by 3.1 percentage points to a solidly profitable 89.7 per cent.
But the motor market remains competitive and, overall, esure's premium rates slipped 5 per cent in 2013 - better, admittedly, than the wider market's 13 per cent decline. Don't expect conditions to improve much this year: chief financial officer Darren Ogden thinks it could be the first quarter of 2015 before the cycle starts to turn. Rising bond yields pose another problem: the return on esure's investment book - largely focused on bonds and cash - fell from 5.2 per cent to 2.2 per cent.
However, with growth opportunities looking limited against such a backdrop, management doesn't plan to sit on capital. Add in the special dividend and esure's payout ratio reached a better-than-expected 85 per cent. Analyst Oliver Steel of Deutsche says that looks "sustainable in current conditions". First-quarter UK weather-related losses are set to cost a modest £3m-£4m more than usual, and Numis Securities expects adjusted EPS of 22.2p this year (from 22.4p previously).
ESURE (ESUR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 270.2p | MARKET VALUE: | £1.13bn | |
| TOUCH: | 270-270.3p | 12-MONTH HIGH: | 337p | LOW: 212p |
| DIVIDEND YIELD: | 3.5%* | PE RATIO: | 59 | |
| NET ASSET VALUE: | 66p | COMBINED RATIO: | 89.7% | |
| Year to 31 Dec | Gross premiums (£m) | Pre-tax profit (£m) | Investment return (£m) | Dividend per share (p) |
|---|---|---|---|---|
| 2010† | 456 | -4 | na | nil |
| 2011† | 500 | 55 | na | nil |
| 2012† | 515 | 116 | 67.9 | nil |
| 2013 | 536 | 118 | 45.5 | 9.5* |
| % change | +4 | +2 | -33 | - |
Ex-div: 9 Apr Payment: 23 May †Prior to flotation *Excludes special dividend of 6.5p | ||||
