Esure told its motor results were ‘disappointing’ by analyst
Esure’s underlying profits took a knock today as the motor insurer revealed it had been hit by increasing small personal injury claims costs.
Underlying profit before tax fell 21.3% to £46.5m for the first six months of this year, compared to £59.1m in the first six months of last year.
The Reigate-based insurer was also hit by lower reserve releases, at £36.2m compared to £46.6m last year, and competitive market pricing.
Esure managed to grow gross written premium 5.8% to £275.5m and in-force polices 2.5% to 1.995m.
Chief executive Stuart Vann said: “The claims environment for the motor market continues to deteriorate and as a consequence we will seek to implement further rate increases in the second half of the year as we look to mitigate against these trends.
“Our outlook for 2015 is that we expect the combined operating ratio for the full year to be in the region of 96% to 97%, assuming normal weather for the remainder of the year.”
Esure’s overall profit before tax increased to £105.4m compared to £57.1m. However, this was because of the decision to buy out the remaining 50% of price comparison site Gocompare. The Gocompare gains were rolled into the profit before tax result.
Shore Capital analyst Eamonn Flanagan said Esure was ‘struggling’ with small personal injury claims.
Esure’s loss ratio worsened to 72.4% compared to 66.4%. This led to overall combined operating ratio deteriorating to 95.8% compared to 90.9%.
“The motor result was disappointing due to the deteriorating claims environment, especially in small personal injury claims, household benefited from better weather and the ancillary income was boosted by a 43% increase in ‘claims income’ to £4.3m,” said Flanagan.
“The company warned of tough claims conditions in UK motor resulting in the expectation of reduced premiums in H2 2015. In H1, motor profits collapsed to £3.3m from £17.1m due to the problems with small personal injury claims, a feature esure seems to be struggling with.”