Ensure warns over premium hit
Sheilas’ Wheels owner esure warned that premium income growth was set to slow as rates come under pressure amid a car insurance price war.
The caution took the shine off esure’s maiden set of half-year results after floating on the stock market earlier this year, which showed pre-tax profits climbing 15.2% to £56.9m, with gross written premiums up 6.7% to £265.4m.
Shares tumbled by 8% on the premium income blow and as its interim dividend payout of 2.5p came in below City expectations.
Chief executive Stuart Vann said the figures showed steady improvements, adding: “We are pleased with our progress in a competitive market.”
But the company said there had been an increase in price competitiveness in personal motor insurance that had picked up pace since the end of the second quarter.
It said: “In the light of current conditions, the group now expects full year premium growth to be lower than that achieved in the first half of the year.”
Figures from AA Insurance last month showed the average cost of annual comprehensive car insurance had dropped 9.8% in the last year.
But esure said the slow-down in full-year premium growth would be substantially 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 and esure said they had seen females experience the greatest level of rate increases across the motor market, particularly for younger drivers.
However, Sheila’s Wheels has not had to shift prices as dramatically as many rivals, since 95% 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 early 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.
But Shore Capital analyst Eamonn Flanagan said: “The interim dividend of 2.5p was much lower than consensus, which may disappoint the market.”
