Could Esure Group PLC, Direct Line Insurance Group PLC And Jardine Lloyd Thompson Group plc Be Next After Amlin plc Takeover?

Following Amlin plc’s (LON: AML) £3.5bn takeover, could these 3 insurance stocks be next? Esure Group PLC (LON: ESUR), Direct Line Insurance Group PLC (LON: DLG) and Jardine Lloyd Thompson Group plc (LON: JLT)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today’s bid of 670p per share for Amlin (LSE: AML) has caused investors to wonder whether other insurers could be next. Certainly, the bid appears to be rather generous, valuing Amlin at £3.5bn versus a closing valuation of under £2.5bn yesterday. And, with the company continuing to struggle to post positive earnings growth, it appears as though the need to diversify risk and expand geographically means that disappointing short term forecasts do not matter so much to potential suitors. This, then, means that bids for other insurers could be on the cards.

Clearly, Amlin is a successful business that has delivered a superb level of dividends in previous years. And, with an excellent management team and relatively stable business model, its appeal to rivals is very evident.

However, there are other non-life insurance companies which offer similar attributes. For example, Direct Line (LSE: DLG) trades on a price to earnings (P/E) ratio of just 11.4 and, while its earnings are due to fall by 14% next year, the last few years have shown that the company is capable of delivering upbeat growth numbers as standalone entity.

Should you invest £1,000 in Aston Martin right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aston Martin made the list?

See the 6 stocks

In fact, Direct Line has posted annualised growth of 12.3% per annum during the last three years and, with its shares offering a yield of 5.8% from a dividend that is covered 1.3 times by profit, it continues to be a superb income play. Furthermore, Direct Line trades on a price to book (P/B) ratio of just 1.7, which indicates that its shares could be acquired at a relatively low valuation.

It’s a similar story with Esure (LSE: ESUR). It currently trades on a P/E ratio of just 13 despite its share price having risen by 17% since the turn of the year. And, like Amlin and Direct Line, it appears to have confidence in its future earnings capacity since it pays out 75% of profit as a dividend, which means that it currently yields 5.7%. Certainly, it has struggled to fully offset the cost of personal injury claims, which put a dampener on its most recent set of results. But, with a sound balance sheet and low valuation, it could be a bid target.

Of course, Jardine Lloyd Thompson (LSE: JLT) has been a very active acquirer in recent years, with its business expanding through a series of purchases since its creation in 1997 (when Jardine Matheson merged with Lloyd Thompson). Today, it remains a very appealing business, with a wide range of divisions operating across the globe. And, with its earnings having risen in each of the last five years, giving an annualised rate of growth of over 10%, JLT appears to be a relatively stable company.

On the face of it though, a bid seems unlikely. That’s because JLT has a P/E ratio of 18.9 and a P/B ratio of 7.4. Both of these figures indicate that it is overpriced but, when it is considered that JLT is expected to increase its earnings by 14% next year, has an excellent track record of growth and could provide diversity to a sector peer, a bid could certainly be possible in the medium term.

So, Direct Line, Esure and JLT all appear to be worth buying and, even if bids do not come along, the returns from all three stocks should be very encouraging.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Amlin and Direct Line Insurance Group. The Motley Fool UK owns shares of Jardine Lloyd Thompson. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mother At Home Getting Son Wearing Uniform Ready For First Day Of School
Investing Articles

Here’s how to try and turn an ordinary Stocks & Shares ISA into a small fortune

Millions of Britons use the ISA as a vehicle for building wealth over the long run. Dr James Fox explains…

Read more »

Two male friends are out in Tynemouth, North East UK. They are walking on a sidewalk and pushing their baby sons in strollers. They are wearing warm clothing.
Investing Articles

Why opening a SIPP for a baby may be a brilliant move

Dr James Fox opened a SIPP for his daughter when she was born. It could turn out to be a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
US Stock

Here’s billionaire Warren Buffett’s advice on surviving market meltdowns

After investing for over 80 years, Warren Buffett is worth $162bn, even after giving away $60bn. Thus, when he speaks,…

Read more »

Small cap sticky note
Investing Articles

Just released: April’s small-cap stock recommendation [PREMIUM PICKS]

We believe the UK small-cap market offers a myriad of opportunities across a wide range of different businesses and industries.

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Up 33%! Here’s why I’m not buying more Lloyds shares this month

Lloyds shares are on a tear in 2025, up almost a third since the year began. But Mark Hartley remains…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

£3,000 in savings? Here’s how it could be used to start investing and earning a monthly passive income

Christopher Ruane outlines how someone could start investing today with a spare £3K to try and build passive income streams…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Tesco shares go ex-dividend on 15 May. Time to consider buying them?

Harvey Jones admires Tesco shares because they combine solid share price growth with a decent level of dividend income. The…

Read more »

Senior couple are walking their dog through a public park in Autumn.
Investing Articles

Is today’s market turmoil a brilliant opportunity to get a high second income from dividends?

Falling share prices drive up yields in a boost for those after a second income from dividends. Harvey Jones looks…

Read more »