Comment on Ogden discount rate

27 February 2017

Comment on Lord Chancellor's decision to change the discount rate for personal injury damages

esure Group plc ("esure" or the "Group") notes the Lord Chancellor's decision to change the discount rate for personal injury damages from plus 2.5% to minus 0.75%.

esure's low risk approach to underwriting and conservative reinsurance programme (due for renewal 1 July 2017) materially reduces the Group's exposure to large claims costs and therefore the impact that a movement in the discount rate has on its financial performance and solvency position.

As at 31 December 2016, the Group's reserve margin included an allowance of £2m (net) for a change in the Ogden discount rate to 0%. The discount rate announced today was lower than the Group had allowed for as at 31 December 2016 and subsequently the Group will see a further net impact of £1m in 2017. The Group continues to expect its combined operating ratio for 2016 to be within its original guidance of 98-99%.

As at 31 December 2016, the Group's solvency coverage above its solvency capital requirement ("SCR") included an allowance of £3m for a change in the Ogden discount rate to 0%. As a consequence of the discount rate moving to minus 0.75%, the Group's capital position in 2017 will be impacted by £2m. The Group's 2016 solvency position will be in the upper half of its stated risk appetite (130-150% coverage of its SCR).

2016 Trading update

· Gross written premiums up 19% to £655m (2015: £550m)

· In-force policies up 9% to 2.2 million (2015: 2.0 million)

· The Group's profit1 will be ahead of market expectations largely driven by a strong investment return

· The Group's solvency position will be in the upper half of its stated risk appetite (130-150% coverage of its SCR)

Stuart Vann, Chief Executive Officer, said: "We are now in full growth mode and have pushed forward with our strategy in 2016 delivering strong growth in premiums and profitability. Our footprint expansion programmes are building momentum with further segments released towards the end of the year, giving us opportunities to continue our growth ambitions.

"Our low risk approach to underwriting and conservative reinsurance programme mitigated much of our exposure to the change in the Ogden discount rate and leaves us well placed within the market compared to our peers.

"Through our focused and controlled approach to underwriting, underpinned by our contribution focus, we are on track to deliver increased value in 2017 and beyond."

For further information:

Background information on the Ogden discount rate

The discount rate is a mechanism for adjusting the present value of personal injury damages awarded to claimants to take into account the return expected when the compensation lump sum is invested.

Notes

1. As at 24 February 2017, the Group compiled consensus for 2016 underlying profit after tax was £73.4m.

About esure Group plc

esure Group plc is an efficient, customer-focused personal lines insurer, founded in 2000 by Chairman, Sir Peter Wood, Britain's foremost general insurance entrepreneur. The Group is one of the UK's leading providers of Motor and Home insurance products through the esure and Sheilas' Wheels brands.

Cautionary statement

The financial information contained in this release is based on unaudited management information.

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and assumptions and are subject to a number of known and unknown risks and uncertainties that may cause actual events or results to differ materially from any expected future events or results expressed or implied in these forward-looking statements. Persons receiving this announcement should not place undue reliance on forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, the Group does not undertake to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

Disclaimer

This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016.

The esure Group plc LEI number is 213800KOI3F5LM54PT80.