The insurer says it has ’not been immune’ from headwinds impacting profitability across the sector 

Esure chief financial officer Peter Bole has described 2022 as “challenging” after the insurer saw its profit drop and combined operating ratio (COR) increase.

The insurer posted its full year results last week (31 March 2023) in a report that stated it had “not been immune” from headwinds impacting profitability across the sector.

Obstacles included claims inflation, a weak pricing environment, increased weather-related home claims and motor claims reverting towards levels seen pre Covid.

As a result, the group delivered a COR of 111.9% for 2022, an increase from 101.1% in 2021.

Its turnover also fell from £908m to £836m due to lower motor volumes, which were partially offset by higher average premiums as a result of price increases.

And group trading profit, Esure’s measure of underlying long term profitability, reduced 44% year-on-year from £84.8m to £47.9m.

Bole told Insurance Times that the return of motorists to the roads after Covid restrictions eased, the new pricing rules to end differentiation between new and renewing premiums and the rising inflation levels all played a part.

“It has been a particularly challenging year for the sector,” he said.

“When we looked to make our plans for 2022, we were clear that we needed to maintain discipline in pricing.

“Our clear focus was on pricing strength and that has been reflected by a fall in the number of premiums we have written.

“Our volumes and turnover have fallen year-on-year, but we are comfortable with that result in the short term.

“The loss ratio has risen by a few percentage points, but it is a lot less than the increases seen by some of our peers.”

’Remain cautious’

However, Bole said the company had made huge progress in its transformation plans to become the UK’s leading digital personal lines insurer with the completion of the work to launch its new trading platform.

While Esure saw its profit before tax reduced from a profit of £5.2m in 2021 to a loss of £42.2m in 2022, the result had been impacted by £61.3m of expenditure related to the group’s Blueprint transformation programme.

Bole said: “We have installed a completely new end-to-end platform, which is now up and running.

“It will set us up very well to achieve higher levels of customer advocacy and efficiency – we are really quite pleased with the success we are seeing from those who are already using the platform and the plan for 2023 is to extend the use of the platform to many more of our customers.

“We have a very supportive investor and board which recognise the long term benefits it will deliver.”

Looking to the year ahead, Bole said the company remained “relatively cautious”.

“Market pricing still has some way to go and while we have seen some signs of other insurers moving in terms of pricing, we will remain cautious and maintain our discipline,” he explained.

“We are still conscious of the high inflation levels and the economy is not at a level where we see a return to the inflation levels we have seen in the past.

“We expect to complete our transformation programme in 2023 and this will set us up strongly for 2024 and beyond.”