£1 billion Esure flotation ‘in weeks’, says Wood

INSURANCE tycoon Peter Wood is targeting a £1 billion price tag after unveiling plans to float his Esure venture on the London Stock Exchange within weeks.

The home and motor insurance group, which employs more than 800 people at its main customer-facing operations base in Glasgow, will clear its debts with £50 million of new share capital while its owners will sell up to half their stake in an initial public offering (IPO) expected to complete before the end of March.

Wood founded Esure in 2000 as a joint venture with the Halifax and gained full control in 2010 in a deal that valued the business at around £260m, teaming up with fellow managers and private equity firm Tosca Penta to buy out the 70 per cent stake which had passed to Lloyds Banking Group through its rescue of HBOS.

The business was made famous by the late Michael Winner’s “calm down, dear” television ads and also owns Sheilas’ Wheels and half of comparison website Go Compare.

Wood, who also founded Direct Line in 1985 as well as several European insurance ventures, said flotation was “a natural next step for a business of Esure’s scale and prospects”. He will remain the largest shareholder.

He said the group’s understanding of risk and the speed with which its management reacted to change had helped it outperform the insurance industry in recent years.

“We’ve made significant investments in recent years in the efficiency and scalability of our IT, operations and claims handling as well as developing the products that meet our customers’ needs and the channels through which they want to buy them,” he said.

“I believe we are now in a strong position to combine these advantages in a new UK insurance sector investment that combines genuine organic growth with potentially attractive returns.”

With 1.25 million in-force motor policies and 500,000 home policies at the end of 2012, Esure more than doubled pre-tax profits to £115.5m last year.

It said its conservative approach to underwriting meant 87 per cent of its motor policy holders were over 30 years of age, while 98 per cent of in-force home policies are located in areas considered to have low risk of flooding.

There had been fears that the firm’s Sheilas’ Wheels business, aimed at women drivers, would suffer when a European ruling banning gender discrimination in insurance pricing came into force at the start of this year, but Esure chief executive Steven Vann said the regulation had in fact given the business an advantage over competitors. The brand has always quoted for men but, because of its distinctive advertising, 95 per cent policyholders are female, which has minimised price disruption caused by the new rules.

Go Compare, based on a website designed by Glasgow-based Indez, may be sold off separately as reports last week suggested it was seeking buyers with a reputed £450m price tag. The planned IPO comes as rising share prices help revive the market for new share issues in Europe after four years of subdued activity since the 2008 financial crisis.

It follows a well-received flotation last October by Esure’s biggest rival, Direct Line, which valued the company at about £2.6bn. Since then, Direct Line shares have risen 17 per cent.