Sector Spotlight: Nonlife insurance

Are there any exciting opportunities for investors in the nonlife insurance sector?

Article updated: 22 January 2021 12:00pm Author: Michael Baxter

With a scattering of companies providing insurance underwriting services covering; motor, household and bodily injury, the nonlife insurance market is often seen as an area for income investors.

Admiral 

Admiral has seen strong growth in recent years, with pre-tax profits doubling over the last five years.

The group specialises in providing low-cost car insurance for young drivers, people living in cities and those driving high-performance cars. All this means it will have to diversify if it wants to remain relevant when autonomous cars begin to emerge — probably later this decade.

Share price 3,034p
One year high 3,034p
Five year high (2020) 3,034p
Change last 12 months 33%
Change last five years 87%
Market cap £m 9,002
Yield % 3
P/E -20
Revenue growth since 2015 62.3%
Pre-tax profits growth since 2015 88.1%
Total assets/total liabilities 1.1%
net assets £m  918

Beazley

Beazley joined the stock market in 2004, it is a Lloyds of London insurer. It specialises in writing speciality-risk insurance and reinsurance business and has been listed on the market since 1986.  

Although both profits and its shares have gone up and down over the last five years, both the current share price and latest pre-tax profits are close to the level five years ago.

Share price 374p
One year high 606p
Five year high (2019) 612p
Change last 12 months -32%
Change last five years -2%
Market cap £m 2,277
Yield % 3
P/E 11
Revenue growth since 2015 44.4%
Pre-tax profits growth since 2015 -5.6%
Total assets/total liabilities 1.2%
net assets £m  1,625

Direct Line Insurance 

Focused on the UK personal motor and home insurance market, Direct Line boasts one of the more recognisable brand names in the UK insurance market. In addition to Direct Line itself, other brands it owns include Privilege, Churchill, Brand Partners, NIG and Green Flag.

Revenue to the end of 2020 was the same as in the year to the end of 2016. Pre-tax profits, however, increased by roughly 50 per cent.

With the release of the company's latest results, it stated: "We are currently on track to deliver a combined operating ratio slightly below our target range of 93 per cent to 95 per cent in 2020, normalised for weather. We also reiterate our medium-term combined operating ratio target, however we acknowledge this will inevitably depend on the duration and uncertainties of the Covid-19 pandemic, the impact of Brexit, the FCA pricing practices report and any consequential impact on customer, market and regulatory approaches.

"We are reiterating our expense ratio target of 20% by 2023. As outlined at our half-year results, our trajectory to get there has been impacted due to the impact of the Covid-19 pandemic."

Share price 334p
One year high 347p
Five year high (2017) 404p
Change last 12 months 6%
Change last five years -8%
Market cap £m 4,524
Yield % 2
P/E 11
Revenue growth since 2015 -4.1%
Pre-tax profits growth since 2015 -5.4%
Total assets/total liabilities 1.5%
net assets £m  2,990

FBD 

FBD is a general insurer serving the needs of its agricultural, small business and consumer customers throughout Ireland.

The company made a nine million euro loss in its latest six month period. Paul D'Alton, Interim Group Chief Executive, said: "These are a robust set of results in very difficult circumstances for our customers and employees. Our profitability, excluding the business interruption costs and capital position remain strong, and we continue to invest in our business for the future. "

The company's dividend was originally set for head-turning levels, but losses inflicted by Covid have hit dividend plans.

Share price 670p
Market cap €m 357
Yield % 13.5
P/E 3
Revenue growth since 2015 1.9%
Pre-tax profits growth since 2015 -5.4%
Total assets/total liabilities 1.4%
net assets £m  375

Hiscox 

Hiscox is a specialist insurer, providing insurance to individuals and businesses around the world. The group is mainly known for its willingness to insure unusual and complicated risks, such as terrorism and fine art, and provide upmarket home insurance.

Revenue has doubled in the last five years, but pre-tax profits have fallen by around three quarters.

Back in August, with the unveiling of interim results, Bronek Masojada, Chief Executive Officer, Hiscox Ltd, said:

"The dedication of our people around the world has enabled the business to respond to the challenges of this global pandemic and to deliver a resilient performance. Our investment in technology has paid off in all areas and supported our growth in Hiscox Retail and Hiscox London Market. Our long-held strategy of balancing volatile big-ticket risks with our more steady retail earnings in the US, UK and Europe provides both stability and opportunity. We are well-positioned to capture the opportunities ahead in all our markets and in all our segments around the world."

Share price 1,006p
One year high 1,384p
Five year high (2020) 1,772p
Change last 12 months -27%
Change last five years -3%
Market cap £m 3,487
Yield % 1
P/E 77
Revenue growth since 2015 107.4%
Pre-tax profits growth since 2015 -75.5%
Total assets/total liabilities 1.2%
net assets £m  2,190

Randall & Quilter 

Randall & Quilter Investment Holdings Ltd. ('R&Q'), headquartered and operating in Bermuda with extensive operations in the US and Europe, is a leading provider of finality solutions for run-off portfolios and global program capacity for MGAs and their reinsurers.

The company has seen revenue increase almost nine-fold in the last five years while profits have increased roughly six-fold.

The company typically pays out good dividends and has a surprisingly low P/E ratio considering its rapid growth.

Share price 176p
One year high 187p
Five year high (2019) 198p
Change last 12 months 7%
Change last five years 105%
Market cap £m 395
Yield % 5
P/E 9
Revenue growth since 2015 749.1%
Pre-tax profits growth since 2015 525%
Total assets/total liabilities 1.2%
net assets £m 290

RSA Insurance 

Formed by the merger of Royal Insurance and Sun Alliance in 1996, RSA Insurance ranks among the leading UK insurers focussing on general insurance and operating in 28 countries. However, it actively continues to reduce its presence in the US.

Pre-tax profits have increased almost five-fold in the last five years.

Last, November, with the unveiling of the company's latest trading update, Stephen Hester, RSA Group Chief Executive, commented:

"RSA's run of record underwriting results is continuing. The group recorded a Q3 discrete combined ratio of 90%2, despite providing fully for the UK BI Court ruling in September. While COVID-19 has held back our profit overall, RSA's inherent strength and the improvements we have made are driving the business forward in a pleasing manner. The outlook for continued underwriting improvements remains positive."

Share price 679p
One year high 679p
Five year high (2018) 681p
Change last 12 months 21%
Change last five years 66%
Market cap £m 7,036
Yield % 1.1
P/E 21
Revenue growth since 2015 3.3%
Pre-tax profits growth since 2015 387.1%
Total assets/total liabilities 1.3%
net assets £m  4,342

All prices are approximate figures taken from 8 January 2021.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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