Esure — FY2022 Earnings Presentation
23 slides from Esure's earnings presentation, April 2023
Slide 1: 2022 Results Update
2022 Results Update April 2023
Slide 2: Table of Contents
Table of Contents 1 Headlines and Strategic Priorities 3 2 Financial Performance 10 3 Risk Profile and Balance Sheet 14 4 Appendix 20
Slide 3: Disciplined pricing and underwriting strategy and continued strategic progress
A disciplined pricing and underwriting strategy and continued strategic progress in a challenging market environment • UK Personal Lines Market Update - as expected, 2022 was challenging: – higher motor claims frequency following two years of lower claims amidst Covid – weak market pricing – introdu
Slide 4: esure at a glance
esure at a glance Focused UK personal lines insurer Operating under four brands, with latest Strong customer proposition Flex brand as challenger proposition vPY In-force Policies 2.32m -8.7% Relational Net Promoter Score Gross Written Premium £735m -8.9% 31 31 Personalised digital insurance Trading
Slide 5: Creating the leading pure play digital insurer in UK personal lines
Creating the leading pure play digital insurer in UK personal lines Strategic Pillars Fixing Insurance for Good Value to Stakeholders Pricing leadership to build scale in Motor PCW Our Customer Digital Leadership • Advanced data science RNPS 31 in 2022 • High-velocity retail trading culture • Mass-m
Slide 6: 2022 – a year of significant strategic progress across esure
2022 – a year of significant strategic progress across esure Transformation Progress Better Customer Experience Driving Force for Good New operating platform: Removing friction Driving inclusion • £90.58 unit cost per policy (-2.7%) • 82% of MTAs can now be completed online • Sponsor: Link Insurance
Slide 7: Drivers of market stress
Data Classification: Internal Drivers of market stress Quote volumes lower for new business following new pricing regulations - CPI vs. Motor average premium (year on year % change)1 particularly in H1 10% 5% 0% Claims inflation heightened and evident in market loss ratios: -5% CPI • Higher energy c
Slide 8: esure focused on core insurance disciplines while building for the future
esure focused on core insurance disciplines while building for the future Pricing & Underwriting • esure Motor NB rating increased by 32.8% in 2022 esure 2022 Pricing Index Discipline 40% >10pts more • Reduced risk selection through late 2021 and 2022 30% than market resulting in lower risk business
Slide 9: Table of Contents
Table of Contents 1 Headlines and Strategic Priorities 3 2 Financial Performance 10 3 Risk Profile and Balance Sheet 14 4 Appendix 20
Slide 10: Managing the growth profile at a weak point in the market cycle
Managing the Growth profile at a weak point in the market cycle Financial Performance Highlights Highlights 2022 2021 vPY • Cautious trading stance with focus on: IFPs (m) 1.72 1.93 -10.9% – Strong pricing discipline to prioritise margin in response to heightened GWP (£m) 639.3 701.5 -8.9% inflation
Slide 11: Core operating metrics impacted by market environment but benefitting from pricing discipline
The Quality of our core operating metrics impacted by market environment but benefitting from pricing discipline and focus on operational efficiency Financial Performance Highlights Highlights 2022 2021 vPY • Maintained strong underwriting & pricing discipline across Motor & Net Loss Ratio 78.5% 73.
Slide 12: Trading profit invested in Transformation programme, reducing shareholder returns
Trading profit invested in Transformation programme, reducing shareholder returns Financial Performance Highlights Highlights 2022 2021 vPY • Solvency coverage within target range of 140%–160% Trading profit/ 47.9 84.8 -43.5% • Equity commitment lifts pro forma solvency coverage to 163% at (loss) (£
Slide 13: Table of Contents
Table of Contents 1 Headlines and Strategic Priorities 3 2 Financial Performance 10 3 Risk Profile and Balance Sheet 14 4 Appendix 20
Slide 14: Low risk investment portfolio
Low risk investment portfolio Conservative approach to asset allocation… …supplemented by well-managed credit risk Other debt and AAA fixed income 22% 9% Corporate Deposits Below BBB bonds with credit or not rated 42% institutions 7% 8% Cash 3% Investments bearing Total investment credit risk and ca
Slide 15: Investment performance over 2022
Investment performance over 2022 Investment Performance Highlights Highlights 2022 2021 vPY • Continued to pursue a conservative investment strategy Underlying Investment Yield(1) 1.6% 1.5% +0.1pp • Stable underlying investment yields; increase in reinvestment yield of c3.4% over the year - will ear
Slide 16: Cautious reserving approach
Cautious reserving approach Accident Year Ultimate Net Loss Ratio Development Over Time(1) % of Ultimate Accident Year Net Earned Premium 91% 86% 85% 83% 84% 81% 81% 78% 79% 75% 76% 72% 71% 69% 68% 65% 64% 62% 58% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 End of Reporting Year +1 year +2 yea
Slide 17: Comprehensive reinsurance programme
Comprehensive reinsurance programme 3 Pillars of Reinsurance Protection: 1 • Reduces capital intensity through risk-sharing with reinsurance Significant Risk-Sharing via Quota Share partner Quota-Share as % of Earned Premium(5) • Supportive for ROE as esure retains 100% of higher margin 40% 40% Quot
Slide 18: Solvency coverage within target range with further equity committed
Solvency coverage within target range (140% to 160%) with further equity committed Group solvency coverage comfortably within the Capital Management target range • Solvency coverage -39ppts versus 2021: – Non-Trading and Finance costs, the majority of which relates to spend on the 188% 149% Blueprin
Slide 19: Table of Contents
Table of Contents 1 Headlines and Strategic Priorities 3 2 Financial Performance 10 3 Risk Profile and Balance Sheet 14 4 Appendix 20
Slide 20: Financial Performance: 2022 Annual Report & Accounts
Financial Performance: 2022 Annual Report & Accounts Year ended 31st Dec • Gross Written Premium 9% lower YoY reflecting conservative trading stance £m 2022 2021 vPY and policy reduction Gross Written Premium 735.7 807.6 -8.9% Net Earned Premium 405.1 443.2 -8.6% Investment Income 19.6 19.1 +2.6% •
Slide 21: Financial Performance: 2022 Annual Report & Accounts
Financial Performance: 2022 Annual Report & Accounts Year ended 31st Dec • Borrowings relate to £125m 10-year subordinated notes that were issued by the £m 2022 2021 vPY Group on 19 December 2014 at the rate of 6.75% per annum Goodwill and intangible assets 21.9 28.7 -23.7% Deferred acquisition cost
Slide 22: Glossary of Terms
Glossary of Terms In-force Policies the number of live insurance policies at any point in time is a key measure of the scale of the Group’s engagement with customers. Turnover includes gross written premiums, income from instalments, and other income net of the reinsurance profit share. This measure
Slide 23: 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