Esure — H1 2014 Earnings Presentation
30 slides from Esure's earnings presentation, Aug 4, 2014
Slide 1: 2014 Interim Results Presentation
GROUP 2014 Interim Results Presentation 4 August 2014
Slide 2: Agenda
Agenda GROUP Welcome & 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: 2014: Headlines
2014: Headlines GROUP Financial Gross written In-force Earnings Dividend premiums policies per share per share £260.4m 1.974m 10.9 pence 5.1 pence (1.9)% +2.1% +2.7% Operational & Strategic LASPO Reforms Underwriting Operational Rating & Cycle & Claims Initiatives Initiatives Slide 2
Slide 4: Financial results
GROUP Financial results Darren Ogden, Chief Finance Officer Slide 3
Slide 5: Group financials
Group financials GROUP Key points 2014 2013 2013 Mvt HY HY FY • Gross written premiums 1.9% lower Gross written 260.4 265.4 (1.9)% 535.8 driven by a reduction in both Motor premiums (£m) and Home Trading profit (£m) 61.0 65.2 (6.4)% 130.6 • Trading profit £4.2m lower due to £3m Profit before tax (£m
Slide 6: Trading profit HY 2014
Trading profit GROUP HY 2014 £5.4m HY ‘13 £6.7m Income streams £17.1m £7.6m HY ’13 £18.3m Underwriting £22.5m 37% HY ‘13 £7.5m Non-underwritten £25.5m 42% ASR £5.4m Investment £7.6m 12% HY ‘13 £6.6m income £25.5m Share of JV £5.4m 9% HY ‘13 £26.1m (Gocompare) Motor underwriting Home underwriting Non
Slide 7: Motor
Motor GROUP Key points 2014 2013 2013 Mvt HY HY FY • Gross written premiums down 1.8% reflecting market conditions Gross written 217.9 221.9 (1.8)% 446.5 premiums (£m) • Modest growth in in-force policies Trading profit (£m) 17.1 18.3 (6.6)% 41.0 • Trading profit down £1.2m – largely driven by Q1 we
Slide 8: Motor loss ratio
Motor loss ratio GROUP Motor 1.8% (2.4)% 68.3% 67.2% (0.5)% 2013 Loss Ratio PY movements Exceptional weather Current year HY 2014 Loss Ratio • Prior accident year reserves continue to develop favourably • £1m of exceptional weather claims in Q1 2014 • Increase in current year loss ratio as claims be
Slide 9: Home
Home GROUP Key points HY HY FY Mvt 2014 2013 2013 • Gross written premiums down 2.3% reflecting market conditions Gross written 42.5 43.5 (2.3)% 89.3 premiums (£m) • Trading profit down £1.2m due to exceptional weather costs of £2m in Q1 2014 – at the Trading profit (£m) 5.4 6.6 (18.2)% 9.6 lower en
Slide 10: Home loss ratio
Home loss ratio GROUP Home (4.8)% 3.6% 59.3% 3.6% 56.9% 2013 Loss Ratio PY movements Exceptional weather Current year HY 2014 Loss Ratio • Exceptional weather costs of £2m in Q1 2014 • Continue to see favourable development of prior accident year reserves – strong favourable development on Q4 2013 w
Slide 11: Additional services revenues
Additional services revenues GROUP Key points Additional services revenues £51.0m £51.0m • Additional services revenue up 5.7%, excluding Claims Income, broadly in line with policy growth £45.4m £48.0m • Motor ASR per IFP, excluding Claims Income, ex-Claims ex-Claims Income down £1 in line with guid
Slide 12: Investment returns
Investment returns GROUP Return on invested funds Gocompare(1) • Investment return of 1.2% in first half of 2014 • Share of trading profit from joint venture down (HY 2013: 1.1%) 19.4% to £5.4m (HY 2013: £6.7m) • Continue to seek reasonable yield with • Lower share of profit due to increased spend c
Slide 13: Regulatory capital & dividend
Regulatory capital & dividend GROUP IGD coverage Dividend Calculation HY 2014 HY 2014 Profit after tax (a) £45.5m 2013 HY 2014 Payout Ratio – Base (b) 50% 369% 391% Payout Ratio – Special (c) 20% 366% 308% Payout ratio (b+c) = (d) 70% Adjustment for interim (e) 67% Interim dividend (a)*(d)*(e) £21.3
Slide 14: Business update & outlook
GROUP Business update & outlook Stuart Vann, Chief Executive Officer Slide 13
Slide 15: What has been happening during H1 2014
What has been happening during H1 2014..... GROUP Rating LASPO & Claims Cycle Regulation Underwriting & Operational initiatives Slide 14
Slide 16: esure's motor rating experience and premiums
esure’s motor rating experience and premiums GROUP 1H 2013 v 1H 2014 Rates Mix AWP 8% 2% 6% Motor experience Quarterly Motor gross written premiums • Average written premium down 6% compared to 1H 2013 • Targeted rate increases in Q2... • ...resulting in a drop in the level of new business conversio
Slide 17: LASPO & Claims – Market perspective
LASPO & Claims – Market perspective GROUP Market frequency Market general damages No. of claims notification forms created and sent to a compensator using MoJ claims portal1 Average General Damages Offered after Contribution 100,000 £3,000 Increase in 90,000 general damages 80,000 £2,600 70,000 Peri
Slide 18: LASPO & Claims – esure view
LASPO & Claims – esure view GROUP Settlements % of personal injury claims settled post LASPO (as at 30 June 2014) c75% May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 esure view • Consolidation of law firms LASPO benefits • Tactical changes by lawyer
Slide 19: The UK Motor Market & Cycle
The UK Motor Market & Cycle GROUP Market rating Market cycle indicators Pricing Index FY 2012 FY 2013 HY 2014 Pricing weakens Confused.com/ (12.7%) (12.5)% (10.1)% Towers Watson(1) AA(2) (6.5)% (14.1)% (11.4)% ABI(3) N/A (9.1)% N/A Underlying results M deteriorate A Market rating & performance EY1 p
Slide 20: Regulation
Regulation GROUP Competition and Markets Authority (“CMA”) The key measures outlined by the CMA: • Better information for consumers • FCA to review how insurers inform consumers about additional insurance products • Ban on “Wide Most Favoured Nation” clauses The CMA have initiated further consultati
Slide 21: Underwriting initiatives
Underwriting initiatives GROUP Continuous • Retention rates maintained at around 80% in both Motor and Home • Sheilas’ Wheels continues to be a positive for the Group with the portfolio over 90% female • Segment re-entry is ongoing with current performance continuing to provide a positive contributi
Slide 22: Operational initiatives
Operational initiatives GROUP Customer Reinsurance • Customer satisfaction and service at the heart • Conservative approach to reinsurance remains of everything we do • Renewed Motor programme on 1 April 2014 • Enhancing our “customer culture” focus within with a deductible of £1m the Group • Progra
Slide 23: Outlook & summary
Outlook & summary GROUP Summary • Solid performance in a tough market • Reserves remain in excess of 15% above our actuarial best estimate and the capital position remains strong • Good progress on underwriting initiatives – well positioned for turn in market Outlook • Highly competitive rating envi
Slide 24: Thank you Questions & Answers
GROUP Thank you Questions & Answers Slide 23
Slide 25: Appendix
GROUP Appendix Slide 24
Slide 26: Regulation
Regulation GROUP Competition and Markets Authority (“CMA”) Theory of Harm (“ToH”) Objective Remedy esure view ToH1 – Remedy A To give consumers better Provide a statement of consumer Support the finding - Measures to improve information of their legal rights and responses to frequently claimants’ un
Slide 27: Regulation (cont.)
Regulation (cont.) GROUP Competition and Markets Authority (“CMA”) Theory of Harm (“ToH”) Objective Remedy esure view ToH 4 – Remedy B To reduce information The following information is to be Support the findings of this - transparent information asymmetries between motor provided at the point of sa
Slide 28: Investment portfolio
Investment portfolio GROUP Key points Asset allocation 3.6% 5.6% • The Group deploys a conservative investment 16.6% 12.7% strategy with the underlying objective of capital preservation • Short duration of approximately one year with 79.9% 81.7% 84% of investments in ‘A’ rated and above 2013 HY 2014
Slide 29: References
References GROUP Slide 11 1. Gocompare – The Group holds a 50% shareholding in Gocompare.com Holdings Limited (“Gocompare”) Slide 16 1. Ministry of Justice Claims Portal – http://www.claimsportal.org.uk/en/about/executive-dashboard/ Slide 18 1. Ernst & Young “UK motor insurance results seminar: Tipp
Slide 30: 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”,