Esure shares lose their grip as maiden results disappoint Square Mile
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.The motor insurer Esure, one of the City's highest-profile flotations this year, hit the skids yesterday after releasing its maiden set of results.
Shares in the owner of Sheilas' Wheels fell 65.5p, or 21 per cent, to 246p, below the 290p at which they were valued when the company floated in March. Esure's founder, Peter Wood, made £198m from the IPO.
The decline in the share price was prompted by disappointment over the company's first set of results since the IPO. Esure said it would pay an interim dividend of 2.5p, lower than some in the Square Mile had expected.
"The dividend was much lower than consensus," Eamonn Flanagan at Shore Capital said. "Given the uncertainty in the UK personal motor market, we remain negative on this whole sub-sector of the non-life market."
City experts said the shares had also been hit by fears of greater competition in the insurance sector, a point that Esure acknowledged yesterday by admitting it expected to take in fewer premiums from customers during the second half of the year.
Other observers said the company was being dragged down by wider industry concerns. Motor insurers face some of the toughest conditions for many years, as well as regulatory uncertainty including a review by the Competition Commission that will be published later this year.
The share fall came as the group increased its pre-tax profit by 15 per cent to £56.9m in the six months ending 30 June. Esure also posted an impressive combined ratio of 89.6 per cent, which means it is making a profit from its underwriting, and said the dividend reflected the fact that it had only been listed since the end of March.
Mr Wood said: "Our first interim results as a listed company show continued growth and profit growth with improvements in our combined ratio and underwriting performance.
"We have been listed for three months and are pleased to declare an interim dividend of 2.5p, representing a payout ratio of 70 per cent."
Last month, Esure's house broker, JP Morgan Cazenove, cut its profit and revenue forecasts for the insurer in view of regulatory proposals. Deutsche Bank, another City institution that worked on Esure's IPO, said yesterday it expected consensus forecasts for the company to fall by about 5 per cent.
Despite this, Hari Sivakumaran, an analyst at Oriel Securities, added: "We feel Esure's low-risk underwriting approach, high retention of existing policies and efficient cost base mean it is better placed than its peers to withstand competitive pressure."
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments