SHARES in insurance group Esure slumped below their March flotation price yesterday as investors baulked at a lower-than-expected dividend payment.
In its maiden announcement as a listed company, Esure yesterday reported a “solid” 15.2 per cent rise in profits, but an interim dividend of 2.5p per share came in below City expectations. The company’s shares were punished, falling 65.5p or 21 per cent to 246p. Shore Capital analyst Eamonn Flanagan wrote in a note that: “The interim dividend of 2.5p was much lower than consensus, which may disappoint the market.”
Esure’s shares were priced in its initial public offering at 290p, valuing the company at £1.2bn. The offering raised £604 million, making it the largest UK company fundraising on the London Stock Exchange this year. Founder and chairman Peter Wood pocketed a £198m windfall in the flotation of the company he founded in 2000.
The owner of the Sheilas’ Wheels brand said pre-tax profits for the six months to the end of June grew to £56.9 million, from £49.4m a year earlier, as gross written premiums rose 6.7 per cent to £265.4m.
The combined operating ratio – a key measure of profitability in the insurance sector – improved to 89.6 per cent, compared with 94.4 per cent a year ago. A figure above 100 per cent would show that more is being paid out in claims than received in premiums.
Wood said the interim dividend would be paid on 17 October and represented a pay-out ratio of 70 per cent. He added: “Our first interim results as a listed company show continued volume and profit growth with improvements in our combined operating ratio and underwriting performance. Our strategy has enabled us to adapt well to our changing marketplace and has stood us in good stead.”
Esure said a slow-down in full-year premium growth would be mitigated by positive factors, including the impact of new gender equality rules on its Sheilas’ Wheels brand.
The rules ban cheaper car cover for women drivers, however its motoring insurance division aimed at women has not had to shift prices as dramatically as many rivals, since 95 per cent of its 700,000 customers are women. It said it had benefited from being able to quote competitive prices on renewal.
It also said there were encouraging signs about the impact of legal reforms tightening the handling of personal injury claims, while it said its home insurance business had performed well.
Chief executive Stuart Vann said the inaugural performance report as a listed company was “in line with management’s expectations for profitable growth”.