Interim Management Statement

esure Group plc

Interim Management Statement for the nine months to 30 September 2014

5 November 2014

Remaining disciplined in tough market conditions

Financial summary

· Total in-force policies increased 2.5% year-on-year and 1.1% year-to-date to 1.954m as at 30 September 2014 (Q2 2014: 1.974m, FY 2013: 1.933m, Q3 2013: 1.906m)

· Motor in-force policies are broadly flat year-to-date at 1.394m (Q2 2014: 1.421m, FY 2013: 1.385m), with Home in-force policies up 2.4% to 0.561m (Q2 2014: 0.553m, FY 2013: 0.548m)

· Gross written premiums year-to-date down 4.0% to £410.0m (YTD Q3 2013: £427.0m), Motor and Home down 4.5% and 1.3% respectively

· Gross written premiums for Q3 down 7.4% to £149.6m (Q3 2013: £161.6m), Motor down 8.8%, with Home broadly flat

· Additional Services Revenues1 ("ASR") year-to-date broadly flat at £79.0m (YTD Q3 2013: £79.3m)

ASR excluding Claims Income up 2.8% to £74.7m (YTD Q3 2013: £72.7m)

· The financial position remains strong, with the Group remaining well capitalised and on track for the implementation of Solvency II

Stuart Vann, Chief Executive Officer of esure Group plc, commented:

"We have seen some signs of rate stabilisation in the UK motor market but it is too early to say if this represents a turn in the motor rating cycle or is a consequence of rating seasonality. We have remained disciplined in our approach, while continuing to position the business for future growth.

"The reduction in our gross written premiums is consistent with our guidance, as we continue to focus on underwriting discipline against a backdrop of a competitive rating environment in both Motor and Home. Over recent months, we have implemented a number of targeted rate increases in Motor, which have resulted in a small reduction in the Group's in-force policies in Q3 compared to Q2.

"With regard to claims, we have previously said it was too early to assess the impact of the LASPO Reforms2. Recent data from the Ministry of Justice Claims Portal3 suggests that claims inflation is starting to re-emerge, driven by an increase in small bodily injury claims frequency. The Group continues to set claims reserves on a prudent basis and, therefore, now expects the combined operating ratio for the full year to tick up towards 92%, assuming normal weather for the remainder of the year."

Business Update

Motor in-force policies are broadly flat in the year as the Group continued to focus on underwriting discipline. This resulted in a reduction in Motor gross written premiums of 4.5% to £343.9m. Risk selection remains a key focus of the Group and it continues to evolve its platform. The Group has launched a number of initiatives during the year as it looks to increase its quote footprint over the medium to long term.

During Q3, the market has seen an increase in small bodily injury claims as evidenced in the Ministry of Justice Claims Portal3data; with the number of claim notification forms created and sent to a compensator in August and September up 15% and 20% respectively, compared to the equivalent months in 2013. The Group will monitor these developments carefully to see if they turn into longer term trends.

The home rating environment remains competitive and this impacted the Group's ability to grow gross written premiums in Home during the first nine months of the year, despite modest growth in in-force policies.

Customers are at the heart of the business and during Q3 the Group launched an alternative business structure, in partnership with one of the UK's leading law firms, Irwin Mitchell, enhancing the customer experience for those unfortunate enough to be involved in an accident.

For further information:

Notes

1. Additional Services Revenues includes four main components: (i) sales of underwritten and non-underwritten additional insurance products to motor and home insurance customers; (ii) installment interest on premium payment plans; (iii) policy administration fees; and (iv) legal panel membership fees and fees generated from the appointment of firms used during the claims process, including vehicle repair, car hire and medical suppliers where applicable in the relevant period ("Claims Income"). Additional Services Revenue is stated before the deduction of any internal costs of acquisition or administration. Non-underwritten additional insurance products revenue represents the commission margins for the Group generated from sales of such products. Underwritten Additional Services Revenue is stated after the deduction of claims costs. Additional Services Revenue is a non-IFRS measure which management uses to evaluate Group performance. It may not be comparable with similarly titled measures used by other companies

2. The Legal Aid, Sentencing and Punishment of Offenders Act 2012

3. The Ministry of Justice Claims Portal data can be found at http://www.claimsportal.org.uk/en/about/executive-dashboard/

Cautionary statement

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 results, performance or achievements of the Group or industry results to differ materially from any future events, results, performance or achievements expressed or implied by such forward-looking statements. Persons receiving this announcement should not place undue reliance on any forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, esure disclaims any obligation or undertaking to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.