For public equities investors, the U.K. motor insurance sector consists of Admiral (OTCPK:AMIGF), Direct Line (OTC:DIISF), Sabre Insurance (OTC:SBIGY), and (soon-to-be-acquired) Hastings (OTC:HNGGF), with market capitalizations ranging from Admiral’s £7.67bn ($10bn) to niche player Sabre’s £650m ($850m).
Year-to-date, Hastings’ share price is up nearly 40% due to the takeover, Admiral is up 17%, but Direct Line and Sabre remain substantially down. The three still-public motor insurers’ shares currently offer Dividend Yields of between 5.5% and 8% approximately.
In this article, we explain why they can be attractive to dividend investors.
Long-Term Structural Growth
U.K. motor insurance premiums have long-term structural growth driven by growth in both the number of vehicles and claim costs.
The number of registered cars and other vehicles in the U.K. has increased every year since the 1990s until H1 2020 (which saw a decline due to COVID-19), with annual growth mostly in the 1-2% range