Esure — FY2013 Earnings Presentation
37 slides from Esure's earnings presentation, 2014
Slide 1: 2013 Full Year Results Presentation
GROUP 2013 Full Year Results Presentation
Slide 2: Agenda
Agenda GROUP Welcome Peter Wood, Chairman Overview Stuart Vann, Chief Executive Officer Financial results Darren Ogden, Chief Finance Officer Business update & outlook Stuart Vann, Chief Executive Officer Questions & answers Slide 1
Slide 3: Welcome
GROUP Welcome Peter Wood, Chairman Slide 2
Slide 4: Overview
GROUP Overview Stuart Vann, Chief Executive Officer Slide 3
Slide 5: 2013: A strong and resilient financial performance
2013: A strong and resilient financial performance GROUP Gross written premiums £535.8m Up 4.0% In-force policies 1.933m Up 9.9% Combined operating ratio 89.7% Improvement of 3.1ppts Earnings per share 22.4p Up 5.8% Full year dividend 15.8p per share Slide 4
Slide 6: Financial results
GROUP Financial results Darren Ogden, Chief Finance Officer Slide 5
Slide 7: Group financials
Group financials GROUP Key points 2013 2012 Mvt • Gross written premiums up 4.0%, with Gross written premiums (£m) 535.8 515.0 4.0% growth in both motor and home Trading profit (£m) 130.6 138.1 (5.4)% • Top line growth aided by 9.9% increase in IFPs, underpinned by retention on core book Profit befo
Slide 8: Trading profit
Trading profit GROUP 2013 £12.9m Income streams £41.0m £14.7m Underwriting £50.6m 39% Non-underwritten £52.4m 40% ASR Investment £14.7m 11% income £9.6m Share of JV £12.9m 10% £52.4m (Gocompare) Motor underwriting Home underwriting (1) Non-underwritten ASR Investment Income Share of JV (Gocompare) N
Slide 9: Motor
Motor GROUP Key points 2013 2012 Mvt • Growth in both gross written premiums and IFPs aided by core book and two market opportunities: Gross written premiums (£m) 446.5 429.0 4.1% — Re-rating and LASPO has allowed us to re-enter certain segments of the market successfully Trading profit (£m) 41.0 30
Slide 10: Motor loss ratio
Motor loss ratio GROUP Motor 70.0% 1.0% 0.6% 2.8% (1.6)% 67.2% 2012 Loss Ratio Exceptional weather Claims supplier PY movements Current year 2013 Loss Ratio costs in 2012 • No exceptional weather costs in 2013 • Continue to see strong favourable development of prior accident year reserves • Small in
Slide 11: Home
Home GROUP Key points 2013 2012 Mvt • Gross written premiums up 3.8% to £89.3m, supported by pricing strategy on home additional insurance products Gross written premiums (£m) 89.3 86.0 3.8% • Trading profit up 128.6% to £9.6m, despite severe weather events in the fourth quarter Trading profit (£m)
Slide 12: Home loss ratio
Home loss ratio GROUP Home 64.5% 3.9% 1.1% 0.2% 59.3% 2012 Loss Ratio Exceptional weather PY movements Current year 2013 Loss Ratio costs in 2012 • Exceptional weather costs of £3.0m in 2012 • No exceptional weather costs in 2013 despite severe weather in Q4 • Continue to see favourable development
Slide 13: Favourable development in reserves
Favourable development in reserves GROUP Key points Net accident year loss ratio development – Total 100% • Group’s performance aided by new Claims System, 90% LASPO claims reforms and “better” weather in 2013 in 80% both Motor and Home 70% 60% • Consistent favourable development of prior accident 5
Slide 14: Additional Services Revenue
Additional Services Revenue GROUP Key points Additional Services Revenue £104.1m £103.9m • ASR income up 7.9%, excluding Claims Income • Motor ASR per IFP, excluding Claims £88.7m £95.7m Income, up 2.2% to £64.3, in line with ex-Claims ex-Claims first half of the year Income Income • Home ASR per IF
Slide 15: Investment returns
Investment returns GROUP Return on invested funds Gocompare(1) • Investment return of 2.2% in 2013 (2012: • Share of trading profit from joint venture up 5.2%) 4.9% to £12.9m (2012: £12.3m) • 2012 exceptional fair value gains of £23.6m, • Profit after tax up 16.4% to £8.5m (2012: as expected, have n
Slide 16: Regulatory capital
Regulatory capital GROUP Key points IGD coverage Adjusted 2012 2013 • The Group is debt free following repayment of subordinated debt at IPO 369% • IGD coverage ratio remains strong and 308% adjusting for the dividend is 308% 253% Coverage Coverage Post dividend Regulatory capital is linked to divid
Slide 17: Dividend
Dividend GROUP Key points Dividend Calculation 2013 2013 Profit after tax (a) £93.2m • 2013 full year dividend of 15.8 pence per share: Payout Ratio – Base (b) 50% — Base dividend of 9.3 pence per share Payout Ratio – Special (c) 35% Annualised payout ratio (b+c) = (d) 85% — Special dividend of 6.5
Slide 18: Business update & outlook
GROUP Business update & outlook Stuart Vann, Chief Executive Officer Slide 17
Slide 19: A strong performance in a tough environment
A strong performance in a tough environment GROUP 2012 2013 Home core book Segment re-entry Sheilas' Wheels IFPs gender opportunity IFPs Motor 1.759m core book 1.933m ...whilst maintaining our good risk selection No Claims Discount Age group above 30 Gender 89% 85% 59% <5yr 5yr+ Above 30 30 and belo
Slide 20: Sheilas' Wheels a continuing advantage
Sheilas’ Wheels a continuing advantage GROUP Gender split • In H2, 2012 we tactically increased exposure to under-35 year old females • Our book remains predominantly female • With competitive pricing… …that is good for the customer and good for us M F Sheilas’ Wheels segment splits Sheilas’ Wheels
Slide 21: Cautious segment re-entry
Cautious segment re-entry GROUP New business accepts • The Group exited certain segments of the market in 2009/10 as it noticed an increase in the number of personal injury claims • The LASPO Reforms and internal enhancements have given the Group confidence in re-entering these segments • Encouragin
Slide 22: Signs from LASPO are encouraging but it is early days...
Signs from LASPO are encouraging but it is early days... GROUP No. of claims notification forms created and sent to a compensator using MoJ claims portal1 100,000 • Encouraging early signs on frequency 90,000 80,000 • Early days on settlement and severity 70,000 60,000 50,000 • Renewal book showing
Slide 23: esure's motor rating experience
esure’s motor rating experience GROUP Average written premiums Core Business Segment re-entry Total + = 9% 4% 5% Mitigants Data led New Claims Segment Sheilas’ The LASPO underwriting System re-entry Wheels Reforms Slide 22
Slide 24: Strong Home performance despite fourth quarter weather impact
Strong Home performance despite fourth quarter weather impact GROUP Home performance GWP +3.8% • Strong results delivered in Home IFPs +8.7% • Growth achieved in a highly competitive market Loss ratio 59.3% • All achieved despite Q4 weather Combined 88.2% operating ratio Weather £426m(1) • Underwrit
Slide 25: Additional Services Revenue
Additional Services Revenue GROUP Introduction of Benefits Products Performance Approach JIC Motor ASR per IFP, excluding Utility Claims Income, Customer Optional £64.30 Transparent Business maintained from half year Compliant Slide 24
Slide 26: A programme of improvement and enrichment
A programme of improvement and enrichment GROUP Underwriting Data Enrichment QUALITY, EFFICIENCY, NCD database, MyLicence INSIGHT Anti-Fraud systems Bespoke Claims System Slide 25
Slide 27: Distribution and mobile enhancements
Distribution and mobile enhancements GROUP • Reaching more customers direct • Fully mobile-optimised ‘Quote & Buy’ journeys • Rapid rise in Smartphone and tablet-sourced quotes as consumers become increasingly channel and device agnostic Slide 26
Slide 28: Extending our reach and engagement
Extending our reach and engagement GROUP • Rapid expansion of social media influence for our Sheilas’ Wheels brand • Highly-targeted reach • ...At a fraction of the cost of traditional mainstream ads Slide 27
Slide 29: Customer focus and feedback
Customer focus and feedback GROUP Feedback Improvement • Focus on experience, satisfaction, feedback and improvement Satisfaction • Low complaint and high recommendation levels... • Nearly 90% of customers would recommend us to friends and family Experience Slide 28
Slide 30: When will the cycle turn?
When will the cycle turn? GROUP Market rating Market cycle indicators Pricing Index FY 2012 FY 2013 Q4 2013 Pricing weakens Confused.com/To (12.7%) (12.5)% (1.1)% wers Watson(1) AA(2) (6.5)% (14.1)% (4.6)% ABI(3) N/A (8.8)% +1.4% Underlying results M deteriorate Note: See appendix I for footnotes A
Slide 31: Outlook & summary
Outlook & summary GROUP 2013 Summary • Strong, resilient financial performance in tough market conditions • Top line and IFP growth • Reserve levels – comfortably in excess of best estimate – consistent with continued strong run-off • Dividend: 85% annualised pro forma payout ratio Outlook • A highl
Slide 32: Thank you
GROUP Thank you Slide 31
Slide 33: Questions and answers
GROUP Questions and answers Slide 32
Slide 34: Appendix
GROUP Appendix Slide 33
Slide 35: Investment portfolio
Investment portfolio GROUP Key points Asset allocation 4% 4% • The Group deploys a conservative investment strategy with the underlying objective of 21% 16% capital preservation • Reduction in cash reflects capital repayments 75% 80% pre IPO • Short duration of approximately one year with 2012 2013
Slide 36: References
References GROUP Slide 6 1. 2012 normalised trading profit of £126.7m includes £7.0m loss relating to above average weather, £23.6m exceptional investment income gain, £0.9m incremental broker expenses and £4.3m loss on Drive Assist entering administration. The impact of these on the loss ratio and
Slide 37: Disclaimer
Disclaimer GROUP The information contained in this presentation has not been independently verified and this presentation contains various forward-looking statements that reflect management’s current views with respect to future events and financial and operational performance. The words “growing”,