Esure profits steady as it holds firm in soft market

Soft rates and a focus on profitability saw personal lines insurer Esure’s gross written premium (GWP) drop by 2% while its profits increased slightly.

Despite a 2.1% increase in the number of in-force policies to 1.974m, Esure’s GWP fell 1.9% to £260.4m (H1 2013: £265.4m).

Its combined operating ratio rose 1.3 points to 90.9%, of which 1.2 points was down to the severe weather events at the beginning of the year.

Chief executive Stuart Vann said: “The first half of 2014 has seen no let-up in the competitive rating environment in both the motor and home markets. The group remained disciplined in its approach to rating and volume, which has contributed towards our solid performance.

“We have continued to enhance our underwriting platform and customer experience in the first half of the year; these developments will play a key role in the delivery of our growth strategy, when market conditions permit.”

Profit before tax was up 0.4% to £57.1m (H1 2013: £56.9m) and the board recommended an increased dividend payment of 5.1p per share (H1 2013: 2.5p)

Esure said it expected premiums to be lower in the second half of this year than in 2013 as it would continue to prioritise profit over volume and saw no signs of a hardening market.

“There has been no change to the group’s view that the UK motor market will not turn until Q1 2015 at the earliest,” it said.

Ancillary income

Profit from Esure’s additional non-underwritten services – which include add-on sales, policy administration fees, interest payments for customers who pay their premium in instalments, and referral fees – fell by 2.2% to £25.5m.

Turnover from additional services was flat at £51m. In the first half of last year Esure received £3.3m from legal referral fees in personal injury claims, which were banned by legal reforms on 1 April 2013. The end of this income stream was offset by growth in other areas, however.

Esure received an average of £53.70 from each policy, down from £59.20 last year.