Esure — FY2023 Earnings Presentation
29 slides from Esure's earnings presentation, March 2024
Slide 1: 2023 Results Update
2023 Results Update March 2024
Slide 2: Table of contents
Table of contents 1. Headlines & Strategic Priorities 03 2. Financial Performance & Balance Sheet 12 3. Outlook 18 4. Appendices 20 2
Slide 3: Headlines & Strategic Priorities
Headlines & Strategic Priorities
Slide 4: At a glance
At a glance Focused UK personal lines insurer Operating under three distinct brands Operating on an industry-leading technology and data platform 2.07m £970m • Cloud-native In-force Policies Turnover vPY -10.8% vPY +16.0% • Event-streaming • Embedded proprietary data science models • High levels of
Slide 5: The market is emerging from a period of unprecedented volatility
The market is emerging from a period of unprecedented volatility Motor insurance market is beginning to emerge from a Average premium paid (£) - Motor period of significant dislocation with more sustainable levels 650 COVID of written profitability: Rate increases restoring market 600 Lower AWP as a
Slide 6: Significant strategic progress as the market emerges from a challenging period
Significant strategic progress as the market emerges from a challenging period Market pricing responded slowly to continued elevated inflation and rising frequency 2023 market severity inflation estimated >10%, • High claims inflation persisted across the market – particularly for damage claims but
Slide 7: Disciplined esure pricing creating foundations for profitable growth
Disciplined esure pricing creating foundations for profitable growth +16% esure Motor rate £969.7m 2.32m £836.0m 2.07m Significant rate increases in excess of the market esure Market Dec-22 Dec-23 IFPs Turnover Significant price increases setting the group up for future profitability: • Sustained pe
Slide 8: We have built the most modern, scalable and extensible cloud native platform
We have built the most modern, scalable and extensible cloud native platform in the UK insurance industry Integrated and cloud native Advanced AI embedded insurance platform • AI models plugged in to customer journeys • First EIS implementation in UK • MLOPS framework running over 20 models • Fully
Slide 9: This platform delivers benefits across our value chain
This platform delivers benefits across our value chain Proposition development Customer service Migration Ability to develop and launch new products A low-cost, modern digital-first experience with A platform architecture that has enabled us and propositions that leverage deep efficient, integrated
Slide 10: This platform delivers benefits across our value chain
This platform delivers benefits across our value chain Pricing Claims Operations and fraud Significant improvement in pricing and A digital-first claims experience with integration to Customer ‘next best action’ and integrated underwriting performance as we leverage best-in-class 3rd party services
Slide 11: The journey has just begun…
The journey has just begun… Our foundations Launched & scaled Integrated Machine Migrated customer esure Flex on our Learning in pricing… base… new platform… …generating immediate commercial value from our proprietary ML infrastructure …rapidly scaling the benefits of the new platform through mid-te
Slide 12: Financial Performance & Balance Sheet
Financial Performance & Balance Sheet
Slide 13: Strong turnover growth with pricing adequacy restored
Strong turnover growth with pricing adequacy restored Financial Performance Highlights Restored pricing adequacy setting the group up for future profitability: 2023 2022 vPY • Overall group turnover increased 16% in 2023 as a result of significant growth in average written premium offset by an 11% r
Slide 14: Higher current period loss ratios as inflationary pressure impacts ahead of pricing discipline
Higher current period loss ratios as inflationary pressure impacts ahead of pricing discipline Financial Performance Highlights Highlights • Elevated claims inflation and a continued return towards pre-pandemic 2023 2022 vPY levels of claims frequency: • Current year loss ratio +3.7pts as the benefi
Slide 15: Continued Transformation programme investment over 2023
Continued Transformation programme investment over 2023 Financial Performance Highlights Highlights • Higher current year loss ratio and lower prior year reserve benefit driving reduced Trading result 2023 2022 vPY • Transformation spend now reducing with tail spend to finish in Q2 2024 along with d
Slide 16: Consistent use of reinsurance and improving capital outlook
Consistent use of reinsurance and improving capital outlook Reinsurance Highlights £14.0m 40% 40% £1.0m £1.0m £12.5m • Consistent reinsurance programme • Low reinsurance retentions relative to peers and market size • Consistent use of quota share to transfer risk and optimise capital requirements –
Slide 17: Strong balance sheet
Strong balance sheet Investments Highlights • Highly-rated bond portfolio, with increase in AAA-AA rated assets AAA Below BBB or 15% over the year Government and supranational bonds not rated 44% 5% • Highly-liquid investment portfolio, with reduction in equity funds and corporate bonds, and increas
Slide 18: Outlook
esure GROUP Outlook
Slide 19: esure well positioned for future growth capitalising on disciplined trading and platform
esure well positioned for future growth capitalising on disciplined trading and Game Changing platform Market Outlook • Both Motor and Home market pricing has now responded to two years of elevated inflation and rising frequency towards a more sustainable pricing level • Stress on capital across the
Slide 20: Appendices
esure GROUP Appendices
Slide 21: Transition from IFRS4 to IFRS17
Transition from IFRS4 to IFRS17 Key messages on the transition to IFRS17: 1. esure’s business model remains unchanged and IFRS17 does not change the underlying economics of the business 2. Accounting treatment and policy choices align closer to Solvency II concepts and reporting 3. Presentational ch
Slide 22: Transition from IFRS4 to IFRS17: Approach
Transition from IFRS4 to IFRS17: Approach Key changes in approach: • Discounting of claims reserves whereby all claims are now discounted using the risk-free yield curve plus an illiquidity premium, with the unwind and change in discount rate recognised separately within Insurance Finance Income / E
Slide 23: Transition from IFRS4 to IFRS17: Income Statement Mapping
Transition from IFRS4 to IFRS17: Income Statement Mapping IFRS4 IFRS17 IFRS4 to IFRS17 changes Total Income Statement 2022 (£m) Total Income Statement 2022 (£m) reflect: Gross written premium 735.8 A C D Insurance revenue 839.7 • Insurance Revenue includes premium and A C D A Net earned premium 405.
Slide 24: Transition from IFRS4 to IFRS17: Bridging 2022
Transition from IFRS4 to IFRS17: Bridging 2022 2022 Net Assets bridge 2022 Income Statement bridge 24
Slide 25: Transition from IFRS4 to IFRS17: Alternative Performance Measures
Transition from IFRS4 to IFRS17: Alternative Performance Measures Net Loss Ratio 2022 Expense Ratio 2022 Combined Operating Ratio 2022 Net incurred claims Insurance service expense – Insurance expenses Insurance expenses Net loss ratio + Net loss ratio + Net earned premium insurance expenses – Expen
Slide 26: Financial Performance: 2023 Annual Report & Accounts
Financial Performance: 2023 Annual Report & Accounts Year ended 31st December 2023 (£m) 2022 (£m) vPY • Insurance revenue increased 3.6% due to significant Insurance revenue 870.1 839.7 +3.6% increases in average written premium offset by the impact of lower policy volumes Insurance service expense
Slide 27: Financial Performance: 2023 Annual Report & Accounts
Financial Performance: 2023 Annual Report & Accounts Year ended 31st December 2023 (£m) 2022 (£m) vPY Goodwill and intangible assets 14.7 21.9 (32.9)% • Borrowings relate to the remaining £25m 10-year subordinated Property, plant and equipment 23.1 26.1 (11.5)% notes that were issued by the Group on
Slide 28: Glossary of Terms
Glossary of Terms In-force Policies is the number of live insurance policies at any point in time and is a key measure of the scale of the Group’s engagement with customers. Turnover includes insurance revenue, excluding the movement in unearned premium, and other income. This measure is used by man
Slide 29: Disclaimer
Disclaimer IMPORTANT: You must read the following before continuing. The attached presentation is in summary form and has been prepared solely for information purposes and on the basis of your acceptance of this disclaimer. The information and the opinions in this presentation have been prepared by