11th Mar 2014 09:08
LONDON (Alliance News) - esure Group PLC Tuesday reported a marginally larger annual pretax profit, aided by lower finance costs, but the motor insurer said the costs of severe weather events in the first quarter of the new year are likely to cost GBP3.0 million to GBP4.0 million more than expected.
In its maiden full-year results after listing in March 2013, the FTSE 250 motor and home insurer, owner of Sheila's Wheels, reported a GBP118.4 million pretax profit for 2013, compared with GBP115.5 million for 2012, despite total income, which includes premiums and investment income, falling by 3.2% to GBP573.5 million and total expenses falling by 2.9%.
Revenue fell despite an improved combined operating ratio, a measure of underwriting profitability, which increased to 89.7% from 92.8%, as investment income and instalment interest fell to GBP45.5 million from GBP67.9 million, while fees for additional services fell to GBP38.8 million from GBP44.4 million. The fall in expenses was driven by declining claims.
The increase in pretax profit therefore was aided largely by a fall in finance costs, which aren't included in total expenses, to GBP2.2 million from GBP9.2 million. The fall was driven by the GBP50.0 million repayment of all the firm's perpetual subordinated loan notes in March 2013. The notes, previously traded on what was the Channel Islands Stock Exchange, were created in February 2010, with an 18.9% interest rate.
However, the improved underwriting performance may not continue in 2014 as a result of the extreme weather in the first-quarter, esure said.
"The rating environment for both the motor and home markets remains highly competitive. The group expects gross written premiums in 2014 to be similar to 2013, but may choose tactically to reduce or increase premium depending on market conditions. As a result, we are targeting a combined operating ratio broadly similar to 2013, before adjusting for the impact of exceptional first quarter weather and assuming normal weather for the remainder of the year," Stuart Vann, chief executive, said in a statement.
Extreme weather and flooding has hurt areas of the UK, particularly in more expensively insured areas of the south, in the first two months of the calendar year 2014, while the UK motor market seen pricing pressures for a sustained period.
esure said it is managing the claims in a "fast and efficient manner".
esure is to pay a maiden 15.8 pence full-year dividend.
esure shares were Tuesday quoted at 270.00 pence, down 1.8%.
By Samuel Agini; [email protected]; @samuelagini
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Esure Group