Not sure this is the type of investment I was expecting from ENA - not sure what I think of it. No financials given.

Could well be $1.5M torched or a significant winner. Not sure how likely it is for people to want to install something on their car, those that don't drive much I imagine would be classic cars which would def not want to add something and probably wouldn't work being electronic?

Ensurance Limited (ASX: ENA) (Ensurance or the Company) is pleased to announce that it has made a strategic investment in innovative car insurance retailer, KOBA Insurance, providing Ensurance with the right to distribute KOBA’s insurance product.

KOBA is a private Australian company that launched in November 2021, offering a data-driven approach to car insurance. Users pay a fixed amount to have their car insured while it’s parked, and then pay only for the distance they drive. Usage is measured through a small matchboxsized device called a KOBA Rider that attaches to a car’s On-board Diagnostics (OBD) port.

pdf (markitdigital.com)

Ensurance CEO shares growth plan after regulator clears sale of UK arm

13 March 2023

Underwriting agency Ensurance says the business is in a “good position” to grow its Australian presence after completing the sale of its UK arm to Melbourne-based listed PSC Insurance Group for $8.2 million.

The two companies said last week the deal has received approval from UK regulator, the Financial Conduct Authority.

Under the terms of the agreement, 75% of the purchase price will be payable in cash and the other 25% via paid ordinary shares of PSC. The issue price of the shares will be determined by the average closing price of PSC stock for the 10 days prior to completion.

Ensurance CEO Tom Kent says the sale proceeds will allow the underwriting agency to “catalyse” its growth plan for the Australian market.

“Now we can look at acquisitions, work on new products. It’s a good position to be in,” Mr Kent told insuranceNEWS.com.au today.

He says one of Ensurance’s goals is to “achieve growth over and above market rates” and the business has been able to do so.

Ensurance is re-focusing on the Australian market, having worked in the last few years to establish its UK business after selling its local underwriting arm to 360 Construction and Engineering in 2020.

Mr Kent says the feedback from brokers has been positive.

“We’re finding that brokers just want more products, they want tailored service, they want to be able to have a discussion with an underwriter about a risk rather than just being told they have to log on to another quote and bind platform,” Mr Kent said.

Clearly investing for growth with a $400k increase in employment costs on the pcp. If they hadn't invested for growth the Australian operations would have generated about $450k in NPBT or annualised about $900k perhaps a bit below with other salary increases. Say 800k NPBT or NPAT of about $560k. That would put them on about 40x earnings but adjust for the PSC shares and cash to come in in the 3Q very roughly 22x earnings.

As long as the investments in staff make sense and they generate revenue ENA looks to be going in the right direction albeit some of it is hidden with the investment. I imagine expenses will increase with the new offices too in the next 6 months.

They would have been FCF positive just from the Australian operations even with the increase in costs which is also nice.

Might take quite some time for everything to show through and be recognised by the market. The insurance PI market may shift to premium softening which would not be good.

A team of former Steadfast executives has launched an underwriting agencies incubator, backed by an American investor, to help new agencies enter the market.

“Rhodian is looking to create and incubate, support the next generation of agency leaders and the brands that they will create,” he says.

Agencies incubator launches with US investor backing - Breaking News - Insurance News - insuranceNEWS.com.au

More interest in the space, a bit annoying for competition with ENA but hopefully there's enough to go around.

A couple of thoughts from the 4C.

Look to be on a $3.5M to $4M revenue run rate from Australian operations.

Would likely have been CF negative I expect if it wasn't for the to be sold EU operations given increased expenditure. I wholly support the increased growth spend but wonder how market will react in future quarters.

All seems to be on track though, and good to see more diversity coming outside of PI to reduce the risk. Good commentary on PI pricing - wish there was a third-party source or newsletter to see where large increases are. Wonder who the new competitors mentioned in PI are.

I like the disciplined capital allocation and not seeing the sale funds burning a hole in their pocket - hopefully they stay that way.

A fund manager letter explaining a little about MGAs - Fluent+Risk+Partners+Inaugural+Partner+Letter.pdf (squarespace.co

Obviously getting some attention overseas.

One of ENA's key lines:

"There is an excess demand for Cyber insurance in Australia vs. available supply. Research by insurance brokerage Aon found the most common reason for an insurer declining to quote for Cyber coverage was inappropriate access controls, followed by the lack of business resilience plans. The same analysis by Aon found insurers were increasingly becoming concerned about risks across all sectors."

Will have to be careful though, a lot of policies losing money for insurers:

Per Macquarie:

A little snippet from Macquarie's review of Arthur J. Gallagher (american insurance company.

PC market renewal premiums continue to increase across all major AJG geographies and product lines globally. Sept qtr to date renewal premiums, rates and exposure combined, are up >10% for the group.

Australia is up 15%; property is up >20%; casualty, high teens; and professional liability in the low teens. Most other lines are in the high single-digit range. New Zealand, renewal premium changes over 10%. Most lines renewal premiums are in this range, +/- a few points.

Cyber remains the most challenging coverage for clients in terms of rate, capacity, and terms. Public company D&O, is seeing a moderation of rate increases; and, in some cases, clients renew their programs closer to flat.

Capital light and operating leverage.

From the SDF recent results call - not on ENA per se but the model.

Stephen Humphrys

Yes, you get a slightly higher leverage, yes, in an agency. It's probably more like 80% as opposed to 70%. And then it really just comes down to that cost and how each particular business performed. As I said, I think where you might have had a slight imbalance this year, I expect some of that to reverse next year and normalize it all back out. So I wouldn't say there's anything what you might call fundamentally different, ultimately, if you look at over that, say, that 2-year horizon.

Robert Kelly

And also, just to give you a little bit more perspective on that, an underwriting agency can write a lot more business without necessarily exponentially having to put on more staff to do it, whereas a broker may be constrained to be able to write another 20% or 30% more business without having an impact on their expense line. So there is a different metric in underwriting agencies in terms of volume, not necessarily being followed by increasing expenses.

Stephen Humphrys

Hence, why the higher margins.

Robert Kelly

That's why the mark in agencies, particularly the larger ones.

Doron Kur

Makes a lot of sense. And maybe just a bit more color, Robert, on your point there around opportunities for agencies as insurers reposition product lines and distribution.

Robert Kelly

Yes. Look, I think that there's more and more where insurers are being more finite about what they want to write and so that at some products, they're dropping out. They're not as keen to write them, but they've still got to be sold into the market that consumers still wishes to buy them. So in doing that, that allows an opportunity for an MGA to pick up the specialist line to fulfill that gap. And so -- and also in some degrees of how their reinsurance is now put together where they elect not to take certain CRESTA codes on in property, then that allows that part of the property section to go into the open market, which again allows us to more develop products to fulfill that gap.

Very large cross trade on ENA. Not sure whether this is the last of the overhang from a shareholder selling out or something else.

I understand want of Ensurance's key product drivers at the moment is cyber insurance so i thought the below was interesting from the AFR as well as another WIRED article. It seems a lot of hackers are targeting those with cyber insruance as they know they will get paid out quickly.

"Cyber insurance against ransomware and other online attacks has been rendered almost useless because too many companies make “dumb” claims, and businesses should move to making claims only as a very last resort, a peak body representing Australia’s top information security officers has warned.

Excessive claims against cyber insurance policies have forced insurance companies to ask too many “invasive and intrusive” questions of prospective policyholders in an effort to keep their exposure to a minimum, said James Turner, managing director of CISO Lens, a forum for Chief Information Security Officers in Australia’s biggest companies.

....

“Cyber insurance is busted because everyone is making claims for dumb stuff … The only time you should be making a claim is when you’re going through something like Maersk did.”

...

Last June, Australian insurance companies endorsed a government move to outlaw insurance payouts to companies that pay the ransom in a ransomware attack, arguing such payments only create further incentives for cyber criminals.

....

That spiralling cost has forced insurers to crack down on claims, adding exclusions for nation-state attacks and for acts of war, both of which might render cyber insurance useless for any attacks arising out of Russia’s invasion of Ukraine, Mr Turner said.

..

“And so the insurer has become a honeypot for attackers. The attackers know if they breach into the insurer they’re going to get a list of all the organisations that are insured, and they’re going to get inside information about their targets.”

In February, the London-based insurance company Aon suffered a cyberattack thought to be motivated by a desire to get access to confidential information about Aon’s policyholders."

Also this WIRED article back up a similar story 'I scrounged through the trash heaps... now I'm a millionaire:' An interview with REvil's Unknown - The Record by Recorded Future