Analyst assesses reasons for aggregator spin-off

Esure’s demerger of Gocompare.com has been driven by Solvency II, according to Shore Capital analyst Eamonn Flanagan.

Esure announced this morning that it would be demerging the aggregator site as a separate company listed on the London Stock Exchange. Existing Esure shareholders will be given pro-rata shares in Gocompare.com as a dividend in specie.

“Whilst we accept the rationale offered by Esure for the demerger, such as independent strategies etc, we view this as a transaction that is driven by Solvency II considerations,” said Flanagan.

He said the acquisition earlier this year of the remaining 50% stake in Gocompare.com that it didn’t already own brought the insurer’s Solvency II coverage ratio down to about 126% at the end of June - below its targeted 130%-150% range.

“This demerger should free up sufficient capital to bring the coverage ratio to the ‘mid to upper end’ of this range,” Flanagan said.

“Of course, the demerger of Gocompare may well have implications for the other personal lines insurers which are reliant upon the price comparison website route for business, such as Admiral and Hastings,” Flanagan added.

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