Moneysupermarket has flagged that car insurance premiums — currently so expensive that you might mistake your renewal quote for the price-tag of a second-hand Kia — are levelling off. It’s the latest example of what’s bad for the comparison site being good news for the rest of us.
The company enjoyed a 27 per cent surge in revenues from its insurance business in 2023 due to “exceptionally high premium inflation”, which prompted customers to head for the site to find cheaper quotes and then switch policies in their masses. But since Moneysupermarket conceded in February that those quotes for car insurance are now stabilising, its shares have fallen by 6 per cent. That follows a longer decline: over the past five years, the newly renamed Mony Group is down 38 per cent, now trading at 227p.
Slowing revenue streams are nothing new for Moneysupermarket, which has been battered by the volatility in household energy bills. Before Russia went to war with Ukraine and rocked the gas market, deal-hunting Brits switching suppliers had handed the site about £50 million in annual revenues. That activity ceased as the UK government’s energy price cap kicked in, and the comparison firm still doesn’t expect to earn anything material from energy switching this year.
The gloom seems more than priced in, however. Moneysupermarket is currently trading on 11 times forecast earnings for 2025 — down from 20 times in 2019 — with a 6 per cent dividend yield pencilled in for next year. It’s “a cheap stock”, according to Andrew Ross at Barclays, who rates the company’s “relatively resilient model and decent medium-term prospects”.
It has strong cash conversion, a £45 million cash war-chest and revenues that rose 8 per cent in the first quarter to £115 million. Despite concerns about that return to more normal insurance rates, Moneysupermarket is confident it will hit expectations for underlying earnings of about £141 million this year.
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The comparison business has also carried out some effective self-improvement over the past few years. Its SuperSaveClub loyalty scheme, which was launched last September, has more than 300,000 users — up from nearly 200,000 in February. The reward scheme is still nascent but now includes ten products and should, with time and scale, help Moneysupermarket to limit its heavy marketing spend (£181 million last year). Scheme members “are purchasing more products, and are more likely to come to us directly than through paid sources”.
Meanwhile, the bedding-in of acquisitions — such as cashback site Quidco, acquired in November 2021 — and the offer of price-comparison services to third-party brands are broadening Moneysupermarket’s market share.
Yes, the firm will always be subject to the slings and arrows of outrageous cycles in insurance and other financial services, but the anticipated recovery in the energy sector will kick in at some point. Moneysupermarket is good value. Buy.
