Bids and blizzards keep busy esure on its toes

LAST MONDAY esure revealed it had been approached by private equity group Bain Capital about a possible buyout.

By the next day a possible offer had become a formal offer, coinciding with the announcement of half year results. A pretty busy week, all things considered.

At 280p per share, the all-cash offer is a hefty 37 per cent above the market price the day before the offer was announced.

But a poor run in the last 12 months means it’s actually lower than the share price a year ago.

Normally that would raise questions about whether the deal will go through. But perhaps not this time round. Chairman Sir Peter Wood, who owns 30.7 per cent of the company, and second biggest shareholder Toscafund, with 17 per cent, are both on board, meaning Bain already has nearly 48 per cent of shareholder votes in the bag.

It will probably do Bain’s bid no harm that half year results were mixed at best.

The focus for esure has been on growing customer numbers, and the first half shows some progress on that front.

Policy numbers rose 8.5 per cent to 2.4million, with the total premiums of £440million 12 per cent ahead of last year. Unfortunately, aggressive growth hasn’t done much for profits, which are a full 20 per cent below where they were last year. The slip is largely down to the increase of insurance claims from the burst pipes and icy roads left in the wake of the Beast from the East. It cost esure some £14million.

Effectively writing profitable insurance contracts isn’t a new problem for esure. The group has been among the worst performers in the sector when it comes to underwriting, and actually makes the majority of its money from cross-selling third-party products to its customers.

So why is Bain interested? Just look at what Stephen Hester has done at RSA. Like esure, RSA is in the competitive and price-driven personal insurance industry.

But a laser-like focus on underwriting and more focused investment has seen the struggling also-ran become a force to be reckoned with in relatively short order.

Bain will hope it can deliver the same kind of results.