Home and vehicle insurer esure (ESUR) crashes 12.2% to 273.5p today, below its 290p March IPO price, as it warns increasing competitiveness in the motor market will lead to significant premium rate reductions. As well as flagging growing levels of competition in the marketplace in the opening weeks of the third quarter, the £1.3 billion cap has disappointed investors by declaring a lower-than-expected half-year dividend.
Chaired by renowned general insurance entrepreneur Peter Wood, Reigate-based esure says it expects full-year premium growth to be lower than that achieved in the first half, eroding the optimism generated by the company’s float, as reported by Shares here.
Increasing pressure on premiums is not the only issue esure faces. Along with peers including Direct Line (DLG), the company could be hit by new legislation. In September the Competition Commission announced an investigation into the industry over concerns that premiums are too high. It is set to report late next year on whether drivers are paying for unnecessarily high breakdown and repair costs. An unfavourable conclusion could reduce premiums further. The market also appears to be underwhelmed with a 2.5p dividend for the six months ended 30 June, a payout which is below the 3p anticipated by analysts.
These are blemishes on what otherwise are a positive set of interim figures, with pre-tax profits improving 15.2% to £56.9 million, driven by a gross written premium rise of 6.7% to £265.4 million. Meanwhile, the company's combined operating ratio – the difference between its premiums and its claims – improved to 89.6% from 94.4% a year earlier.