UBS downgrades Esure to 'sell' over higher risks than peers

UBS forecast lower margin ahead on the new risk segments Esure is expanding into, while also predicting early Ogden reinsurance renewals and releases coming in below guidance due to reduced reserve conservatism on new business.

"Furthermore, the risk to Esure's growth from a lower price growth environment is higher than peers, in our view," the Swiss bank said in a note to clients.

Analysts think the current valuation of 14 times earnings for the 2017 full year "underappreciates these risks" and that dividend expectations are inflated.

With higher risk growth requiring capital, UBS expects growth and margin to leave Esure with insufficient capital generation to pay special dividends.

UBS cut its target price for Esure's shares almost 15% to 220p to reflect a reduction in earnings due to margin pressure and the reduced valuation of the motor business and footprints.