Despite higher weather-related claims, insurer esure (ESUR) - which is famous for its female-focused Sheila's Wheels motor brand - delivered a solid first-half underwriting performance. Its combined ratio (of claims to premiums) deteriorated by just 1.3 percentage points year-on-year to a robustly profitable 90.9 per cent.
But the motor book, which generates 84 per cent of gross premiums, saw premium rates slide 8 per cent amid continued competitive conditions. True, that performance looks relatively resilient for the sector with the AA, for example, having recorded an 11.4 per cent fall in motor rates for the market as a whole. Management, however, is planning for a competitive second half and chief executive Stuart Vann reckons that a turn in the motor market’s fortunes may not materialise until 2015’s first quarter.
Given that lacklustre backdrop, esure - like many of its peers - is struggling to fully utilise its capital and has therefore continued to make generous dividend payouts. Add in a 1.5p first-half special dividend and the payout ratio reached 70 per cent.
Unsurprisingly, given the low-risk nature of the investment book, the investment return reached just 1.2 per cent in the half.
Broker Numis expects full-year EPS of 21.1p (from 21.7p in 2013).
ESURE (ESUR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 260p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 260-261p | 12-MONTH HIGH: | 306p | LOW: 208p |
| DIVIDEND YIELD*: | 4.3% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 64p | COMBINED RATIO: | 90.9% | |
| Half-year to 30 Jun | Gross premiums (£m) | Pretax profit (£m) | Investment income (£m) | Dividend per share (p)* |
|---|---|---|---|---|
| 2013 | 265 | 56.9 | 7.5 | 1.8 |
| 2014 | 260 | 57.1 | 7.6 | 3.6 |
| % change | -2 | - | +1 | +100 |
Ex-div: 3 Sep Payment: 17 Oct *Excludes special dividends: 6.5p in 2013, and 1.5p in 2014's second half | ||||
