Finance director Andrew Whitehouse insists a boost to prior-year reserves will not be needed

Rising bodily injury claims pushed Esure Insurance Ltd, the principal subsidiary of insurance entrepreneur Peter Wood’s Esure group of companies, into a loss for 2009.

Esure Insurance Ltd, which writes motor and household insurance on behalf of the group, made a loss after tax on ordinary activities of £14.2m for the year to 31 December 2009, compared with a profit of £27.2m in 2008. The 2008 result was boosted by £45m in other income – an amount received from former parent HBOS, now part of Lloyds Banking Group, for marketing purposes.

However, the insurer’s 2009 technical result, which excludes items such as investment and other non-underwriting income and expenses, was a loss of £27.9m, compared with a loss of £5m in 2008. The firm’s loss ratio increased by 9.7 points to 93.5% as a result of motor bodily injury claims and poor winter weather at the beginning of the year. Despite an improvement in the expense ratio, Esure Insurance’s combined ratio increased by 7.9 points to 112.8%.

Esure responded to the rising bodily injury claims by starting to raise rates in early 2009. “On average, we made double-digit per cent increases in both 2009 and again during 2010 to date,” Esure finance director Andrew Whitehouse said, adding that the hikes were in line with the market.

However, the company had to put up a £13.6m unexpired risk provision for business in force at year-end 2009. “Therefore, the result for the year was a loss of £14.2m,” the company’s report read.

Whitehouse said that Esure’s reserves are reviewed frequently and regularly by an independent actuarial firm. “The reviews undertaken during 2010 to date confirm the view that we remain prudently reserved and there is no requirement to bolster prior-year claim reserves,” he said.

“Accordingly, we have no plans to increase prior reserves along the lines recently announced by IAG and RBSI.”

Esure Holdings, the parent firm for the group, made an after-tax loss of £25.5m in 2009 compared with a profit of £3.5m in 2008. But it made a £1.1m profit before tax and preference share interest, compared with a £38.5m profit in 2008.

The company has now been transferred to a new holding entity, Esure Group Holdings, following management’s purchase of Lloyds Banking Group’s 70% stake in the firm in February this year.