G R O U P Full Year Results

Transcription

1 Full Year Results 10 March 2017

2 Agenda Welcome and overview Stuart Vann, Chief Executive Officer Financials Darren Ogden, Chief Finance Officer Business review and outlook Stuart Vann, Chief Executive Officer

3 Pushing forward our growth strategy Gross written premiums In-force policies Underlying profit after tax 655m 19% 2.2m 9% 80.5m 18% Performance Solvency Dividend Expanded quote footprint Enhanced customer contribution focus Positive rating environment in UK motor 149% at the top end of risk appetite 13.5 pence per share 70% payout; inclusive of special Slide 2

4 Financials

5 Group Key points Gross written premiums up 19.0% to 655.0m through positive rating action n Motor and in-force policy growth of 8.6% 2015 Mvt Gross written premiums ( m) % In-force policies ( IFPs ) (millions) % Underlying profit after tax up 18.0% to 80.5m Trading profit from continuing operations ( m) % Combined operating ratio of 98.8% Expense ratio reflects customer growth Investment return of 2.2ppts Solvency coverage ratio 149% Full year dividend of 13.5 pence per share reflects a 70% payout of underlying earnings per share Reported profit after tax ( m) % Underlying profit after tax ( m) % Combined operating ratio (%) (1.0)ppts Loss ratio (%) (0.2)ppts Expense ratio (%) (0.8)ppts Investment return gross (%) ppts Dividend per share (pence) % Solvency coverage ratio (%) ppts Slide 4

6 Motor Key points Gross written premiums up 22.3% to 563.7m through positive rating action and in-force policy growth 2015 Mvt Gross written premiums ( m) % Trading profit up 32.8% to 8.9m as positive rating earns through ahead of claims inflation In-force policies (millions) % Expense ratio broadly flat reflecting the investment in new business customers Trading profit from underwriting ( m) % Combined operating ratio (%) ppts Loss ratios Loss ratio (%) ppts 87.5% (Accident year) 81.9% (Accident year) 11.2% 6.2% Expense ratio (%) (0.3)ppts ASR per IFP ( ) (2.5)% 76.3% 75.7% Motor Trading Profit ( m) (Underwriting + ASR + Investments) % 2015 Prior year development Reported loss ratio Slide 5

7 Home Key points Gross written premiums up 2.2% to 91.3m; albeit slowdown in 2H Claims from weather events 3.2m ahead of expectation in 2015 Mvt Gross written premiums ( m) % In-force policies (millions) % Flood Re levy of 2.9m has impacted the expense ratio Trading (loss) / profit from underwriting ( m) (2.4) 4.2 (157.1)% Combined operating ratio (%) (8.0)ppts Loss Ratio 74.7% (Accident year) 12.5% 77.0% (Accident year) 11.0% Loss ratio (%) (3.8)ppts Expense ratio (%) (4.2)ppts ASR per IFP ( ) % 66.0% Home Trading Profit ( m) (Underwriting + ASR + Investments) (36.0)% 2015 Prior year development Reported loss ratio Slide 6

8 Additional services revenues Key points ( m) 2015 ( m) Mvt Total income from additional services up 3.5% to 106.5m Non-underwritten trading profit up 8.9% broadly in line with year-on-year policy growth Strong growth in non-underwritten performance in 2H (+13%) expected to continue in 2017 ASR per IFP Non underwritten additional insurance products % Policy administration fees and other income (7.6)% Claims income % Instalment income % Non-underwritten additional services % Underwritten additional insurance products (7.5)% Total income from additional services % Non-underwritten Trading Profit % Strong second half Non-underwritten Trading Profit +4% +13% Instalment income Admin & Cancellation Claims income Instalment income Admin & Cancellation Claims income H H Slide 7

9 Investment returns Key points Total investment return of 18.1m Investment return on assets under management: Gross: 2.2% Net: 1.8% Strong return on equity portfolio in line with market indices; improvement in fixed income asset valuations as a result of falling GILT curve Strategic asset allocation Investment income ( m) Net gains / (losses) on investments ( m) Investment charges ( m) Net investment return ( m) 2015 Mvt % 3.8 (7.7) 149.7% (3.5) (3.3) 6.1% % ( m) % Target allocations % Other income ( m) % Cash & Liquidity Claims backed Surplus Total investment return ( m) % Investment return - gross (%) ppts Total 863 Slide 8

10 Demerger accounting Key points Gocompare.com Demerger and performance reported in discontinued operations Fair value gain of 213.6m recognised on Demerger under IFRIC 17; not included in underlying profit after tax Gocompare.com contribution to underlying profit after tax of 19.2m (2015: 16.4m) Period ended 3 Nov m Year ended 31 Dec 2015 m Investment return Fees for additional services Total income Other operating expenses (88.6) (67.6) Share of joint venture profit Trading profit Fair value gain Amortisation of acquired intangibles (11.1) (10.4) Period ended 3 Nov m Market capitalisation on 3 November Net assets of Gocompare.com at Demerger 88.2 Fair value gain on Demerger Fees associated with the demerger of Gocompare (14.5) - Deemed disposal/ demerger gains Share of joint venture tax - (0.5) Profit before tax Taxation expense (2.8) (1.1) Profit after tax from discontinued operations Slide 9

11 Regulatory Capital Key points Own Funds & Solvency Capital Requirement Risk appetite: % % Risk appetite Coverage: 149% Tier 1 66% % Margin for contingencies Limited impact from Ogden discount rate Sensitivities demonstrate capital resilience Tier 2 34% 100% Solvency Capital Requirements Own Funds Capital SCR by risk type Sensitivities to Group coverage ratio Credit Risk Operational Risk Motor loss ratio +5ppts (1) (7)ppts Yield curve down 50bps (1)ppts Market Risk Equities down 25% (1)ppts Credit spreads widen 50bps (1)ppts Underwriting Risk 1987 Hurricane (2)ppts Note: The Group s SCR allocation by risk type, is based upon the undiversified capital requirement Note: (1) Sensitivities are stated after earnings impact (net of tax and dividend at payout ratio) with events assumed to occur on 31/12/16 Slide 10

12 Dividend Key points Payout ratio of 70% for the full year Base: 50% Special: 20% Full year dividend per share: 13.5p Final dividend: 10.5p Final dividend (base): 6.6p Final dividend (special): 3.9p Interim dividend: 3.0p 2017 Calculation Dates Profit after tax ( m) Fair value gain on Demerger ( m) (213.6) Amortisation of acquired intangibles assets (net of tax) ( m) 10.4 Demerger fees ( m) 14.5 Underlying profit after tax ( m) 80.5 Payout ratio 70% Full year dividend ( m) 56.4 Full year dividend (pence per share) 13.5 Dividend to be set with reference to reported profit after tax Dividend policy unchanged: Base dividend of 50% of reported profit after tax; plus a special dividend if the Group has excess capital after allowing for profitable growth opportunities Ex-dividend date: 13 April 2017 Record date: 18 April 2017 Payment date: 26 May 2017 Slide 11

13 Business review & outlook

14 Overview Gross written premiums In-force policies New Motor policies 655m 2.2m 40% 19% 9% Core footprint Expanded footprint 24% 151% Digital distribution Quote footprint (Motor) Retention c.85% of new business sales through price comparison websites 70-80% of total market 78% of customers renew with us Slide 13

15 Footprint expansion in Motor Strategic rationale Market rating cycle Illustrative policy count (static footprint) Illustrative footprint expansion policy count opportunity Slide 14

16 Footprint expansion in Motor Footprint expansion size of the opportunity Size of the opportunity Core Footprint 1 Footprint 2 Quote footprint (Cumulative) Vehicles (Size of market: 30m vehicles) c.40% c.55% c.70-80% c.12m c.+4m c.+6m In-force policies 1.4m 0.2m - Market share c.12% + growing c.4% + growing Opportunity New segment releases Today Test and learn approach to new segments through focused and controlled approach to underwriting Slide 15

17 Footprint expansion in Motor Growing in size Key points Footprint 1 launched in April 2014; test and learn approach New business volumes gained momentum through 2014 and 2015 Acceleration of Footprint 1 segments in ; renewals now starting to come through Footprint 2 launched in December ; test and learn approach Expect volumes and premiums to continue growing in 2017 New business Motor policies by segment Gross written premiums in Motor by segment 100% 100% 75% 50% Footprint 1 launched Footprint 2 launched 75% 50% New business and renewal premiums 25% 25% 0% 0% Footprint 2 Footprint 1 Core Footprint 2 Footprint 1 Core Slide 16

18 Footprint expansion in Motor New Business Footprint 1 metrics Conversion Lower conversion in new segments; test and learn Averaged earned premium Expanding into higher premium business Core Footprint Core Footprint Claims frequency New business contribution Higher claims frequencies aren t always a bad thing Overall contribution is performing at least in line with Core Core Footprint Core Footprint Slide 17

19 Digital distribution; data-led Digital distribution Direct player Customer ownership Technology focus Data-led analytics Multi-variant interactions Full contribution analysis Customer life-time value Great service Strong retention Individual pricing Win it Keep it Competitive price Great service NPS Slide 18

20 Motor Life time value Win it on price and brand; keep it on price and service New business Cumulative contribution ( m) Digital marketplace Data Analytics Highly risk selective Price comparison website fee Renewals Great service Strong retention Seasoned book Time Slide 19

21 Motor Rating & Volumes Key points New business rating Prior rating actions have positioned us strongly compared to the market 1H vs 2H H vs 1H Provides opportunity to increase rates at a slower rate than the market to grow profitably Average rate increase of 10% Average written premiums 12% higher Confused/TW 6% 7% esure 4% 4% Indexed new business volumes Rating strength Quarterly premiums - esure Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Year/Quarter ABI esure Q1 Q2 Q3 Q Slide 20

22 Motor Claims environment Key points claims inflation in the region of 5% Inflation driven by third party damage claims Strategies in place to mitigate against this in 2017 Claims costs Personal injury Large personal injury Third party damage Note Claims cost represent the Accident Year (net) Accidental damage MoJ Claims Portal frequencies Frequency lower in MoJ Claims Portal; although higher proportion settled directly across the market 900, , , , ,000 Large claims Allowance for discount rate of 0% as at 31 December ; additional 1m impact from movement to minus 0.75% in 2017 Low exposure to large claims Strong reinsurance programme; low reinsurance retention ( 1m) 800, , , , ,000 Relatively few PPOs (11) No quota share reinsurance 700,000 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Slide 21

23 Home Now is not the time to grow Key points Strategy Adverse weather impacted performance; positive contribution from segment Rating environment challenging; not conducive to growth Enhancements made to underwriting capability to deliver improved performance in the medium term Now is not the time to grow; we are prepared to shrink the portfolio Rating enhancements/improved risk selection Diversified and controlled approach to footprint expansion Contribution focus Weather costs Storms Frank to Katie Flash flooding in June and September Rating AA index Price comparison website rating 17% lower than end of % 4% Increase in IPT 2% 6.6m 3.2m exceptional 0% -2% 3.4m -4% Actual Budget -6% 2014 Q Q Q Q Q Q Q3 Price comparison website 2015 Q4 Q1 Direct Q2 Q3 Q4 Slide 22

24 Summary & outlook Summary Strong performance in top and bottom line Growth ahead of guidance; capital at top of risk appetite; and special dividend Generating profitable growth opportunities through footprint expansion On track to deliver increased value in 2017 and beyond Ambition to grow to 3 million in-force policies by Outlook Gross written premiums In-force policies Combined operating ratio Nonunderwritten ASR % +5-10% 96-98% Ahead of IFPs assuming stable market conditions and normal weather Slide 23

25 Appendix

26 Assets under management Key points Asset Allocations Assets under management 14% higher at 863m; strong premium growth and demerger dividend from Gocompare.com Asset allocations broadly aligned with target allocations; surplus over indexed in cash awaiting investment Investment duration of 2.6 (2015: <1 year); better alignment of claims backed assets ( m) % Target allocations % Cash & Liquidity Claims backed Surplus Total 863 Fixed Income Credit rating ( m) % 2015 ( m) 2015 % % 2015 % Corporate Bonds Government Floating Rate Notes Covered / RMBS Total AAA 18% 24% AA 35% 27% A 22% 28% BBB & below 25% 21% Slide 25

27 financial reporting (current) Year ended 31 December Motor Underwriting Home Underwriting Non- Underwritten additional services Investments Continuing Operations Total m m m m m Gross written premiums Earned premiums, net of reinsurance Investment income Instalment interest income Other income Total income Net incurred claims (356.4) (55.6) - - (412.0) Claims handling costs (19.5) (3.6) - - (23.1) Insurance expenses (85.8) (27.5) - - (113.3) Other operating expenses - - (14.5) - (14.5) Total expenses (461.7) (86.7) (14.5) - (562.9) Trading profit / (loss) 8.9 (2.4) Amortisation of acquired intangibles (2.3) Non-trading costs (0.9) Finance costs (8.7) Profit before taxation 72.7 Tax expense (13.2) Profit after taxation 59.5 Net expense ratio 22.4% 36.9% 24.6% Net loss ratio 75.7% 66.0% 74.2% Combined operating ratio 98.1% 102.9% 98.8% Slide 26

28 financial reporting (new) Year ended 31 December Motor Home Continuing operations total m m m Gross written premiums Earned premiums, net of reinsurance Investment income Instalment interest income Other income Total income Net incurred claims (356.4) (55.6) (412.0) Claims handling costs (19.5) (3.6) (23.1) Insurance expenses (85.8) (27.5) (113.3) Other operating expenses (13.4) (1.1) (14.5) Total expenses (475.1) (87.8) (562.9) Trading profit Amortisation of acquired intangibles (2.3) Non-trading costs (0.9) Finance costs (8.7) Profit before taxation 72.7 Tax expense (13.2) Profit after taxation 59.5 Net expense ratio 22.4% 36.9% 24.6% Net loss ratio 75.7% 66.0% 74.2% Combined operating ratio 98.1% 102.8% 98.8% The above is an illustrative representation of the financials reported in line with the Group s new segmental reporting Slide 27

29 Reconciliations of underlying profit Trading profit to profit before tax Profit before tax from continuing operations to underlying profit before tax m m m m Trading profit from continuing operations Profit before tax from continuing operations Non-trading costs (0.9) (0.2) Profit generated by Gocompare.com Finance costs (8.7) (8.7) Share of joint venture (net of tax) Amortisation of acquired intangible assets (2.3) (2.3) Amortisation of acquired intangible assets Profit before tax from continuing operations Underlying profit before tax Reported profit after tax to underlying profit after tax Continuing Discontinued Group m 2015 m m 2015 m m 2015 m Reported profit after tax Fair value gain on Demerger - - (213.6) - (213.6) - Joint venture deemed disposal gain (63.8) - (63.8) Amortisation of acquired intangible assets (net of tax) Fees associated with the Demerger Underlying profit after tax Slide 28

30 Regulation Regulatory change Markets Implementation Expected impact Renewal transparency Motor & Home April 2017 Limited Outcome Better transparency for customers at renewal Small claims court limit increase to 5k Whiplash reforms Motor October 2018 (planned) Fixed tariff settlement for general damages Likely to reduce severity of claims FCA GI value measures Ogden discount rate Motor & Home January 2017 Limited Motor Announced 27 February 2017 Effective 20 March 2017 Ban pre-medical offers Allowance in IFRS and capital for a movement to 0% Additional impact in 2017 from move to minus 0.75% will be marginal Additional indicators of value for consumers Higher claims costs for large personal injury costs settled via a lump sum payment Slide 29

31 References Slide Confused.com/Wills Towers Watson Pricing Index published January ABI Q4 Motor Insurance Premiums published February 2017 Slide Ministry of Justice Claims Portal published 13 January Slide Q4 AA British Insurance Premium Index published 24 January 2017 Slide 30

32 Disclaimer 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, scope, platform, future, expected, estimated, accelerating, expanding, continuing, potential and sustainable and similar expressions or variations on such expressions identify certain of these forward-looking statements. Others can be identified from the context in which the statements are made. These forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other factors, which may be beyond esure Group plc s (the Group s ) control and which may cause actual results or performance to differ materially from those expressed or implied from such forward-looking statements. All statements (including forward-looking statements) contained herein are made and reflect knowledge and information available as of the date of preparation of this presentation and the Group disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein. Nothing in this document should be construed as a profit forecast. Slide 31