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esure increases its growth targets

The insurer is broadening its insurance coverage, aiming for 3m in-force policies by 2020
March 13, 2017

This time last year, esure (ESUR) raised a few eyebrows by forecasting gross written premium growth in 2016 of 10-15 per cent and a 4-6 per cent growth in policy numbers. This looked to be a hard ask, but in fact the motor and home insurer's gross written premiums rose by 19 per cent, while in-force policies were up by 8.6 per cent at 2.17m. The dividend is up, helped by a capital boost from the GoCompare.com (GOCO) demerger, and the latter business is also progressing well thusfar.

IC TIP: Buy at 239.8p

An additional 12 segments were launched on the motor insurance side, which means the company can now offer quotes on 70-80 per cent of the motor market without taking any material increase in risk. Significantly, this will enhance its target of reaching 3m in-force policies by 2020. Premiums improved on the motor side, but the home market remained a challenge, with fierce competition driven by price comparison websites. Profitability was also dented by adverse weather at the start of the period.

An adverse change in the Ogden discount rate - used to calculate injury payouts - from 2.5 per cent to minus 0.75 per cent, was mitigated by the group's reserve margin, which included an allowance for a change in the rate to zero.

Deutsche Bank forecasts pre-tax profit for 2017 of £89.2m and EPS of 18p (from £73m and 14.8p in 2016).

ESURE (ESUR)
ORD PRICE:239.8pMARKET VALUE:£1bn
TOUCH:239.7-240p12-MONTH HIGH:245pLOW: 168p
DIVIDEND YIELD:5.6%PE RATIO:4
NET ASSET VALUE:65pCOMBINED RATIO:98.8%

Year to 31 DecGross premiums (£)Pre-tax profit (£m)Investment return (£m)Dividend per share (p)*
2012#51511667.9nil
201352611845.515.8
201451810342.916.8
2015 (restated)55060.936.311.5
201665572.755.713.5
% change+19+19+53+17

Ex-div: 13 Apr

Payment: 26 May

#Prior to flotation *Includes special dividends of 3.9p in 2016, 3.3p in 2015, 6.9p in 2014 and 6.5p in 2013