Shares in Personal Group (PGH:AIM) remain flat as the market ignores a downgrade to the insurance and employee benefits provider’s 2016 profits. Investors have instead focused on another year of headline growth in 2015 and are sticking with the stock.

Shares edge 0.9% higher to 565p following a 14% rise in pre-tax profits to £10.4 million in 2015. The total 20.9p a share dividend is 7% higher than was paid in 2014.

This was achieved despite a disappointing performance by its salary sacrifice mobile phone business, PG Mobile. A systems upgrade and a wait for a consumer credit licence limited revenue to £1.5 million, against the £10 million expected.

Delays at PG Mobile and an investment in home technology salary sacrifice business Let’s Connect have led to analysts at Cenkos downgrading some of their forecasts. They now expect earnings before interest, tax, depreciation and amortisation (EBITDA) of £11.3 million in 2016, down from £15.9 million.

‘We expect FY16 to be typified by investment in both Let’s Connect and PG Mobile (which will be combined to form PG Technology), which effectively delays earnings from FY16 to FY17 versus earlier forecasts,’ they said in a note.

Web - Personal Group - 30 March 2016


A high point is that Personal boasts an envious 62% combined ratio, which are premiums minus claims and expenses. The rule of thumb is that the further below the 100% mark premiums are, the more profitable the insurer is. Direct Line (DLG) reported a 94% figure for 2015 while Esure’s (ESUR) ratio is 97.8%.

Chief executive Mark Scanlon puts this down to his policies being sold in the workplace and not over the phone or online. So his sales team meet people who are working and so are typically in reasonable health.

One issue that shareholders could feel unhappy about is management’s decision not to pass the rise in insurance premium tax onto existing customers. The decision has cost the business £500,000, according to Scanlon.

George Osborne lifted the tax to 9.5% from 6% in November, which increases to 10% by the end of this year.

Issue Date: 30 Mar 2016