Esure in 'full growth mode' as insurance premiums rise

Motor and home insurer Esure Group said it was now in "full growth mode" as underlying profit surged 20% in 2016, with premiums ahead of expectations and barely any effect from the now infamous changes to the 'Ogden' rate.

Gross written premiums increased 19% over the calendar year to £655.0m, with reported profit before tax from continuing operations expanding 19.4% to £72.7m.

As the demerger of price comparison business Gocompare.com was completed on at the beginning of November, the group's reported profit after tax was more than doubled to £269.2m thanks mainly to the value gain on demerger of Gocompare.com.

Motor underwriting increased trading profits by a third to £8.9m, home underwriting recorded a loss of £2.4m due to higher bad weather claims and the Flood Re levy, while there was also a larger profit from non-underwritten additional services and investments.

Underlying earnings per share increased 17.7% to 19.3p, largely driven by an improvement in the investment return.

A final dividend of 10.5p per share was proposed, which together with the interim dividend of 3.0p per share, takes the full year dividend to 13.5p per share, up 17%.

Esure only saw £1m impact on post-tax profit last year and for 2017 from the Lord Chancellor's reduction of the 'Ogden' discount rate that is used to calculate personal injury claims.

"We are now in full growth mode," said chief executive Stuart Vann, hailing strong growth in premiums and profitability as the group widened the number of customers through its 'footprint expansion' programme that aims to have 3m in-force policies by 2020.

"We continue to focus on and control carefully our approach to underwriting, underpinned by our enhanced customer contribution modelling," he said.

"As a result, we are on track to deliver increased value to shareholders both in 2017 and beyond."

On the outlook for 2017, assuming stable market conditions and normal weather, the board continues to expect strong growth in both premiums and in-force policies at 15-20% and 5-10%, respectively.

The combined operating ratio is expected to be in the region of 96-98%; and non-underwritten additional services revenues are forecast to grow ahead of in-force policies in line with the trend seen in the second half of 2016.