Shares in Esure Group PLC (LON:ESUR) drove higher this morning after the motor insurer reported an “excellent” first half of the year, with growth in premiums, policies and profits.
The FTSE 250-listed company said it is benefiting from higher prices which allowed pre-tax profits to soar by 45% to £45.1mln (H1 2016: £31.2mln) in the six months ended 30 June.
Gross written premiums also jumped 23% to £393.3mln (H1 2016: £320.4mln), while in-force policies rose by almost 9% to 2.26mln (H1 2016: 2.08mln).
READ: Motor insurers stranded on the hard shoulder as Barclays downgrades
On track to hit top end of full-year guidance
As a result of the strong performance, esure declared an interim dividend, which includes a special dividend, of 4.1p per share; more than a third higher than the 3p it paid out this time last year.
Perhaps more pleasingly for investors though, the strong 2017 so far means that the British insurer is on course to hit the top end of its full-year guidance.
‘Great start to the year’
“We have delivered strong growth in premiums, policies and profits as the success and momentum of our footprint expansion programme and disciplined underwriting continues to drive the business forward,” said chief executive Stuart Vann.
“Overall, it has been a great start to 2017, and we are firmly on track to deliver results at the positive end of our 2017 guidance.”
Shares too expensive, says broker
“esure reported 2017 interims which were slightly ahead of our and the market’s expectations driven by better than we had expected results from motor and higher instalment / ancillary income which offset a much weaker than we had forecast performance from household,” said Shore Capital analyst Eamonn Flanagan.
“Trading at a punchy 16x [forward price-earnings ratio], with ancillary and instalment income accounting for 68% of the first half underlying profits, we reiterate our ‘sell’ recommendation on esure.
“We view the rating as much too aggressive given the level of competition in the UK household and esure’s issues within it, the turmoil in UK motor and the additional hit esure has taken on its reinsurance cover, and the heavy reliance the group has on ancillary / instalment income.”
Shares gained 2% in early deals to 299p.
--Updates for broker comment and share price--