Shares in esure Group tumbled over 3% early on Friday (5 August), after the insurance group reported a decline in underlying pre-tax profit in the first half of its financial year due to adverse weather. The insurer, which cut its interim dividend from 4.2p per share to 3p following the results, also indicated Britain's vote in favour of leaving the European Union was expected to have a limited impact on its operations.
In the six months to 30 June, the FTSE 250-listed group reported a 1.9% year-on-year decline in pre-tax profit to £45.6m (€53.8m, $59.8m), while gross written premiums increased 16.3% to £320.4m, largely thanks to a 18.2% gain in gross written motor premiums.
Should current market conditions in the motor insurance field remain unchanged, it expects gross written premiums for the full year to increase between 13% and 18% , with in-force policy growth of between 6% and 9%.
The ongoing trend of low oil prices has seen an increase of vehicles on the roads, which in turn has led to a higher number of accident claims, while premiums have increased on the back of higher repair costs and a rise in uninsured drivers.
In the first half the group combined ratio - the sum of the loss, commission and expense ratios - stood at 99.2% and the company expects it to remain between 98% and 99% for the full year. A number below 100% indicates a profit.
"We remain well capitalised under Solvency II and I am pleased to declare a dividend of 3p per share reflecting the board's decision to retain capital as we look to take advantage of favourable motor market conditions," said group chairman Sir Peter Wood.
Wood added the strategic review of the group's Gocompare.com business, which began in June, remains ongoing. Group chief executive Stuart Vann said the division has delivered revenue growth of 22% and was one of the main business' main drivers, thanks to a wider product offering.
"We are well placed for further profitable growth across both businesses in the second half of the year," he added.