CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

		Reviewed	Reviewed	Audited
		As at	As at	As at
		30 June 2015	30 June 2014	31 Dec 2014
	Note	£m	£m	£m
Assets
Goodwill and intangible assets	9	190.6	13.3	13.3
Deferred acquisition costs		24.9	28.8	28.0
Property, plant and equipment	10	29.7	23.1	26.7
Investment in joint venture		-	36.9	39.8
Financial investments	11	707.0	710.0	810.0
Reinsurance assets	12	230.0	228.3	209.3
Insurance and other receivables		198.3	176.7	180.1
Cash and cash equivalents		47.5	20.4	25.1
Total assets		1,428.0	1,237.5	1,332.3
Equity and liabilities
Share capital		0.3	0.3	0.3
Share premium account		44.0	44.0	44.0
Capital redemption reserve		44.9	44.9	44.9
Other reserves		1.2	-	0.0
Retained earnings		242.9	176.1	193.0
Total equity		333.3	265.3	282.2
Liabilities
Insurance contract liabilities	12	876.4	893.3	851.7
Borrowings	11	122.2	-	122.4
Insurance and other payables		73.6	66.9	64.9
Deferred tax liabilities		12.7	0.3	3.3
Derivative financial liabilities		0.3	0.2	0.4
Current tax liabilities		9.5	11.5	7.4
Total liabilities		1,094.7	972.2	1,050.1
Total equity and liabilities		1,428.0	1,237.5	1,332.3

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Attributable to owners of the parent
		Share capital	Share premium account	Capital redemption reserve	Available-for-sale reserve	Retained earnings	Total equity
	Note	£m	£m	£m	£m	£m	£m
6 months ended                30 June 2015
At 1 January 2015		0.3	44.0	44.9	0.0	193.0	282.2
Profit for the period		-	-	-	-	97.6	97.6
Other comprehensive income		-	-	-	1.2	-	1.2
Total comprehensive income for the period		-	-	-	1.2	97.6	98.8
Transactions with owners:
Issue of share capital		0.0	0.0	-	-	-	0.0
Share-based payments		-	-	-	-	0.9	0.9
Deferred tax on share-based payments		-	-	-	-	0.0	0.0
Dividends	5	-	-	-	-	(48.6)	(48.6)
Total transactions with owners		0.0	0.0	-	-	(47.7)	(47.7)
At 30 June 2015		0.3	44.0	44.9	1.2	242.9	333.3
6 months ended                30 June 2014
At 1 January 2014		0.3	44.0	44.9	-	185.0	274.2
Profit for the period		-	-	-	-	45.5	45.5
Total comprehensive income for the period		-	-	-	-	45.5	45.5
Transactions with owners:
Share-based payments		-	-	-	-	0.8	0.8
Deferred tax on share-based payments		-	-	-	-	0.0	0.0
Dividends	5	-	-	-	-	(55.2)	(55.2)
Total transactions with owners		-	-	-	-	(54.4)	(54.4)
At 30 June 2014		0.3	44.0	44.9	-	176.1	265.3

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

 

				Attributable to owners of the parent
		Share capital		Share premium account		Capital redemption reserve		Available-for-sale reserve	Retained earnings	Total equity
	Note	£m		£m		£m		£m	£m	£m
Year ended                31 December 2014
At 1 January 2014		0.3		44.0		44.9		-	185.0	274.2
Profit for the year		-		-		-		-	82.4	82.4
Other comprehensive income		-		-		-		0.0	-	0.0
Total comprehensive income for the period		-		-		-		0.0	82.4	82.4
Transactions with owners:
Issue of share capital		0.0		0.0		-		-	-	0.0
Share-based payments		-		-		-		-	2.0	2.0
Deferred tax on share-based payments		-		-		-		-	(0.0)	(0.0)
Dividends	5	-		-		-		-	(76.4)	(76.4)
Total transactions with owners		0.0		0.0		-		-	(74.4)	(74.4)
At 31 December 2014		0.3		44.0		44.9		0.0	193.0	282.2

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

		Reviewed	Reviewed	Audited
		6 months ended 30 June 2015	6 months ended 30 June 2014	Year ended     31 Dec  2014
Cash flows from operating activities	Note	£m	£m	£m
Profit after tax for the period		97.6	45.5	82.4
Adjustments to reconcile profit after tax to net cash flows:
- Finance costs		4.0	-	0.3
- Depreciation and revaluation of property, plant and equipment	10	0.7	0.6	1.1
- Amortisation of intangible assets	9	5.0	1.6	3.2
- Unrealised investment losses / (gains)		5.5	6.2	(2.0)
- Share scheme charges		0.9	0.8	2.0
- Share of profit after tax of joint venture		(2.6)	(3.5)	(8.5)
- Joint venture deemed disposal gain	8	(63.8)	-	-
- Taxation expense		7.8	11.6	20.9
- Interest and dividends receivable on financial investments		(10.8)	(15.0)	(13.3)
- Instalment interest receivable		(14.3)	(14.8)	(30.5)
Operating cash flows before movements in working capital, tax and interest paid		30.0	33.0	55.6
Sales of financial investments		253.7	307.7	383.0
Purchases of financial investments		(150.9)	(275.5)	(451.6)
Interest and dividends received on financial investments		6.5	7.8	16.2
Instalment interest received		15.7	16.3	30.5
Changes in working capital:
- (Increase) / decrease in insurance and other receivables		(8.2)	1.7	(0.3)
- Increase / (decrease) in insurance contract liabilities and insurance and other payables		7.1	(27.7)	(52.3)
Taxation paid		(9.0)	(11.7)	(22.1)
Net cash generated / (used) in operating activities		144.9	51.6	(41.0)
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired	8	(75.1)	-	-
Dividends received from joint venture		10.0	6.8	8.8
Purchase of property, plant and equipment and software		(4.6)	(10.4)	(16.0)
Net cash used in investing activities		(69.7)	(3.6)	(7.2)
Cash flows used in financing activities
Proceeds on issue of Ordinary Shares		0.0	-	0.0
Issue of loans	11	-	-	122.1
Interest paid on loans	11	(4.2)	-	-
Dividends paid	5	(48.6)	(55.2)	(76.4)
Net cash (used in) / from financing activities		(52.8)	(55.2)	45.7
Net increase / (decrease) increase  in cash and cash equivalents		22.4	(7.2)	(2.5)
Cash and cash equivalents at the beginning of the period		25.1	27.6	27.6
Cash and cash equivalents at the end of the period		47.5	20.4	25.1

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

1.         General information

esure Group plc is a Company incorporated in England and Wales. Its registered office is The Observatory, Reigate, Surrey RH2 0SG.

The nature of the Group's operations is the writing of general insurance for private cars and homes and, following the acquisition of the outstanding 50% of the ordinary shares of Gocompare.com Holdings Limited ("Gocompare"), price comparison services. The Company's principal activity is that of a holding Company.

All of the Company's subsidiaries are located in the United Kingdom, except for esure S.L.U, which is incorporated in Spain. 

 

2.         Accounting policies

Basis of preparation

These condensed consolidated interim financial statements present the Group's financial information for the six months ended 30 June 2015 and have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union (EU). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at the year ended 31 December 2014 which are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.

These condensed consolidated interim financial statements have been prepared in Sterling and rounded to the nearest hundred thousand. Throughout these interim financial statements any amounts which are less than £0.05m are shown by 0.0, whereas a dash (-) represents that no balance exists. 

As required by the FCA's Disclosure and Transparency Rules, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2014.

The Group has adopted the following interpretation during the period, with a date of initial application of 1 January 2015:

 

·      IFRIC Interpretation 21 - Levies (issued on 20 May 2013): IFRIC Interpretation 21 Levies became effective under EU law for accounting periods beginning on or after 17 June 2014 and has been adopted by the Group from 1 January 2015. The interpretation clarifies that a government (or governmental agency) levy is not recognised until the obligating event specified in legislation/regulation occurs, even if there is no realistic opportunity to avoid the obligation.  The Group has aligned the timing of its recognition of provisions for levies to that required by the IFRIC interpretation. Whilst this is considered to be a change in accounting policy in line with IAS 8, no restatement of comparative information has been performed on materiality grounds.

There are a number of other amendments to standards with a date of initial application of 1 January 2015, the adoption of which has had no material effect on the Group's accounting policies.

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

2.         Accounting policies (continued)

These condensed consolidated interim financial statements have been prepared on a going concern basis. The Group has a strong financial position with robust reserves, a conservative investment portfolio and capital significantly in excess of the minimum regulatory requirement. In addition, the Board has reviewed the Group's projections for the next twelve months and beyond, including cash flow forecasts and regulatory capital surpluses. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months.

The financial information contained in these interim results does not constitute statutory accounts of esure Group plc within the meaning of Section 435 of the Companies Act 2006. Statutory accounts for esure Group plc for the year ended 31 December 2014 have been delivered to the Registrar of Companies. The auditors have reported on the accounts, their report was:

(i)         unqualified;

(ii)        did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and

(iii)       did not constitute a statement under Section 498 (2) or (3) of the Companies Act 2006.

 

3.         Critical accounting judgements and estimates

The Group's 2014 Annual Report and Accounts provide details of significant judgements and estimates used in the application of the Group's accounting policies. There have been no significant changes to the judgements and estimates during the interim period, other than those arising in respect of the valuation of intangible assets recognised on acquisition of the outstanding 50% of Gocompare.

Key source of estimation uncertainty 

Insurance contract liabilities     

Estimates have to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not reported ("IBNR") at the reporting date. It can take a significant period of time before ultimate claims cost can be established with certainty and for some types of claims.

The ultimate cost of outstanding claims is estimated by carrying out standard actuarial projections in line with the Institute and Faculty of Actuaries Technical Actuarial Standards. These techniques use past claims information and development patterns of these claims to project the expected future claims cost both for notified and non-notified claims.

Similar judgements, estimates and assumptions are employed in the assessment of adequacy of provisions for unearned premium and hence whether there is a requirement for an unexpired risk provision.

Intangible assets recognised on acquisition of the outstanding 50% of Gocompare

On acquiring the outstanding 50% of Gocompare, the Group recognised intangible assets separately from goodwill as required by IFRS 3 - Business Combinations ("IFRS 3"). The valuations were performed using fair value as the standard of value, being the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.

The valuation techniques applied to the identified intangible assets were selected based on the nature of the asset and experience of management, being the relief-from-royalty method for the brand and the multi-period excess earnings approach for customer relationships. See note 8 for more detail.

Cash flow projections underlying the valuations were based on Board forecasts at the date of acquisition. Management judgement was applied in calibrating key inputs to the valuation models including; profit margins, growth rates, persistency, royalty rates, contributory charges and the discount rate.

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

3.         Critical accounting judgements and estimates (continued)

The useful life of each intangible asset represents management's view of the period over which it expects the associated benefits to be consumed. The amortisation charge is based on the pattern in which management expects the business to consume those benefits and for both the Gocompare brand and customer relationships this was assessed to be on a straight-line basis.

 

4.         Segmental information

Differences to the Group's 2014 annual report and accounts in the basis of segmentation

 

On 31 March 2015, the Group acquired the outstanding 50% of the ordinary shares of GoCompare. Following the acquisition, the Group's basis of segmentation has changed such that the contribution of Gocompare to the Group's consolidated income and expenses, other than the amortisation of the Gocompare brand and customer relationships, are reported under a new segment "Price comparison".

 

The amortisation of acquired intangible assets relating to the Gocompare brand and partner relationships recognised on application of IFRS 3 is presented in amortisation of acquired intangibles (see note 9 for more detail). The joint venture deemed disposal gain recognised on application of IFRS 3 to the acquisition is presented as a separate item (see note 8 for more detail). Gocompare's tax expense for the period following acquisition is presented in the Group's tax expense.

 

The share of joint venture profit received until 31 March 2015 is recognised under the investments segment in the same way as the Group's share of joint venture profit is presented in the segmental information provided for the six months ended 30 June 2014 and the year ended 31 December 2014.

Segmental revenues, expenses and other information

 

An analysis of the Group's results by reportable segment is shown below:

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

4.         Segmental information (continued)

Reviewed Six months ended 30 June 2015	Motor underwriting	Home underwriting	Non-underwritten additional services	Price comparison (from 1/4/2015)(1)	Investments	Total
	£m	£m	£m	£m	£m	£m
Gross written premiums	233.3	42.2	-	-	-	275.5
Earned premiums, net of reinsurance	201.8	41.2	-	-	-	243.0
Investment income	-	-	-	-	3.9	3.9
Instalment interest income	-	-	14.3	-	-	14.3
Fees for additional services	-	-	19.2	28.0	-	47.2
Total income	201.8	41.2	33.5	28.0	3.9	308.4
Net incurred claims	(154.5)	(21.4)	-	-	-	(175.9)
Claims handling costs	(9.1)	(1.5)	-	-	-	(10.6)
Insurance expenses	(34.9)	(11.2)	-	-	-	(46.1)
Other operating expenses (excl. amortisation of intangibles)	-	-	(6.6)	(20.9)	-	(27.5)
Total Expenses	(198.5)	(34.1)	(6.6)	(20.9)	-	(260.1)
Share of joint venture profit (gross of tax and amortisation)	-	-	-	-	3.5	3.5
Trading profit	3.3	7.1	26.9	7.1	7.4	51.8
Non-trading costs						(0.9)
Amortisation of acquired intangibles						(4.9)
Joint venture deemed disposal gain						63.8
Finance costs						(4.0)
Profit before taxation						105.8
Tax expense						(8.2)
Profit after taxation						97.6
Net expense ratio	21.8%	30.8%				23.4%
Net loss ratio	76.6%	51.9%				72.4%
Combined operating ratio	98.4%	82.7%				95.8%

 

 

⁽¹⁾ The Price Comparison segment reports Gocompare's contribution to the Group's trading profit subsequent to the acquisition of the outstanding 50% of the ordinary shares of Gocompare on 31 March 2015. The Group's 50% share of Gocompare's profit up until the date of acquisition is reported as share of joint venture profit.  

Segment assets and liabilities

 

A measure of the Price comparison segment's assets and liabilities is reported to the Board. Total assets relating to the segment (including goodwill and intangible assets arising on application of IFRS 3 to the acquisition of Gocompare by the Group) were £216.0m as at 30 June 2015. Total liabilities relating to the segment were £21.6m as at 30 June 2015.

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

4.         Segmental information (continued)

Reviewed Six months ended 30 June 2014	Motor underwriting	Home underwriting	Non-underwritten additional services	Investments	Total
	£m	£m	£m	£m	£m
Gross written premiums	217.9	42.5	-	-	260.4
Earned premiums, net of reinsurance	204.2	41.3	-	-	245.5
Investment income	-	-	-	7.6	7.6
Instalment interest income	-	-	14.8	-	14.8
Fees for additional services	-	-	18.3	-	18.3
Total income	204.2	41.3	33.1	7.6	286.2
Net incurred claims	(139.4)	(23.5)	-	-	(162.9)
Claims handling costs	(8.2)	(1.2)	-	-	(9.4)
Insurance expenses	(39.5)	(11.2)	-	-	(50.7)
Other operating expenses (excl. amortisation of intangibles)	-	-	(7.6)	-	(7.6)
Total Expenses	(187.1)	(35.9)	(7.6)	-	(230.6)
Share of joint venture profit  (gross of tax and amortisation)				5.4	5.4
Trading profit	17.1	5.4	25.5	13.0	61.0
Amortisation of acquired intangibles					(2.0)
Non-trading costs					(0.8)
Finance costs					-
Profit before taxation					58.2
Tax expense					(12.7)
Profit after taxation					45.5
Net expense ratio	23.4%	30.0%			24.5%
Net loss ratio	68.3%	56.9%			66.4%
Combined operating ratio	91.7%	86.9%			90.9%

 

  

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

4.         Segmental information (continued)

 

Audited Year ended 31 December 2014	Motor underwriting	Home underwriting	Non-underwritten additional services	Investments	Total
	£m	£m	£m	£m	£m
Gross written premiums	429.3	88.5	-	-	517.8
Earned premiums, net of reinsurance	407.7	83.1	-	-	490.8
Investment income	-	-	-	12.4	12.4
Instalment interest income	-	-	30.5	-	30.5
Fees for additional services	-	-	36.8	-	36.8
Total income	407.7	83.1	67.3	12.4	570.5
Net incurred claims	(284.8)	(49.1)	-	-	(333.9)
Claims handling costs	(15.7)	(2.8)	-	-	(18.5)
Insurance expenses	(76.1)	(22.8)	-	-	(98.9)
Other operating expenses (excl. amortisation of intangibles)	-	-	(16.3)	-	(16.3)
Total Expenses	(376.6)	(74.7)	(16.3)	-	(467.6)
Share of joint venture profit  (gross of tax and amortisation)				12.5	12.5
Trading profit	31.1	8.4	51.0	24.9	115.4
Amortisation of acquired intangibles					(3.9)
Non-trading costs					(5.3)
Finance costs					(0.3)
Profit before taxation					105.9
Tax expense					(23.5)
Profit after taxation					82.4
Net expense ratio	22.5%	30.8%			23.9%
Net loss ratio	69.9%	59.1%			68.0%
Combined operating ratio	92.4%	89.9%			91.9%

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

4.         Segmental information (continued)

Reconciliation of segmental information to IFRSs statement of comprehensive income

 

The Group incurred non-trading costs of £0.9m in the six months ended 30 June 2015 relating to activities associated with the acquisition of Gocompare and share-based payments in respect of the long service and one-off awards issued at the time of the Group's Admission to the London Stock Exchange in 2013 (30 June 2014: £0.8m relating only to long service and one-off awards; 31 December 2014: £5.3m).

 

The Group's segmental information presents non-trading costs and the amortisation of acquired intangibles separately from other operating expenses.

 

Additionally, the Group's share of joint venture profit until the date of acquisition of Gocompare is presented before tax and amortisation. These items, which are presented within share of profit after tax of joint venture in the condensed consolidated income statement are presented within amortisation of acquired intangibles and tax expense in the segmental information.

 

5. Dividends

During the six months ended 30 June 2015, a dividend per share of 11.7p (£48.8m) was declared by the Board of Directors as a final dividend for the year ended 31 December 2014. The esure Employee Benefit Trust waived their right to a dividend and a dividend of £48.6m was paid by the Group.  Subsequent to 30 June 2015, an interim dividend per share of 4.2p (£17.5m) has been declared by the Board of Directors (2014: interim dividend per share of 5.1p, £21.3m).

6.        Earnings per share

 

Basic

 

Basic earnings per share is calculated by dividing the earnings attributable to the owners of esure Group plc and the weighted average of Ordinary Shares in issue during the period, excluding Ordinary Shares held as employee trust shares.

 

Diluted

 

Diluted earnings per share is calculated by dividing the earnings attributable to the owners of esure Group plc by the weighted average of Ordinary Shares in issue during the period adjusted for any dilutive potential Ordinary Shares.

 

The difference between the basic and diluted weighted average number of shares outstanding during the period, being 993,493 (31 December 2014: 607,206; 30 June 2014: 814,151), relates to the dilutive potential of the share-based payment arrangements. 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

6.        Earnings per share (continued)

Basic and diluted earnings per Ordinary Share

	Reviewed   Six months ended 30 June 2015	Reviewed   Six months ended 30 June 2014	Audited   Year ended 31 Dec 2014
Profit after taxation (£m)	97.6	45.5	82.4
Weighted average number of shares (million) - basic	415.5	415.3	415.3
Earnings per share - basic (pence per share)	23.49	10.96	19.84
Weighted average number of shares (million) - diluted	416.5	416.1	415.9
Earnings per share - diluted (pence per share)	23.44	10.93	19.81

 

The IAS 33 earnings per share calculation is disclosed above and is based on a weighted average number of shares in issue for the six months ended 30 June 2015.

Underlying earnings per Ordinary Share

 

As a result of the acquisition of the outstanding 50% of the share capital of Gocompare on 31 March 2015, the Group has recognised a joint venture deemed disposal gain and amortisation relating to the intangible assets arising on the application of IFRS 3. In order to better reflect the Group's performance for the period and its dividend paying capacity, an additional underlying earnings per share calculation is presented below. The reported profit after tax for each period is adjusted for the Group's joint venture deemed disposal gain (30 June 2015: £63.8m; 30 June 2014: £nil; 31 December 2014: £nil) and amortisation of acquired intangibles, as disclosed in the segmental information in note 4, net of the deferred tax credit associated with the amortisation (30 June 2015: £3.9m; 30 June 2014: £1.6m; 31 December 2014: £3.2m). The weighted average number of ordinary shares is set at the number of Ordinary Shares in issue as at the reporting date.   

	Reviewed   Six months ended 30 June 2015	Reviewed   Six months ended 30 June 2014	Audited   Year ended 31 Dec 2014
Profit after taxation (£m)	97.6	45.5	82.4
Adjustments net of taxation (£m)	(59.9)	1.6	3.2
Underlying profit after tax (£m)	37.7	47.1	85.6
Weighted average number of shares (million) - basic	416.8	416.8	416.8
Underlying earnings per share (pence per share)	9.0	11.3	20.5

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

7.         Taxation

Excluding the effects of the deemed disposal gain arising on application of IFRS 3 to acquisition of the outstanding 50% of the ordinary shares of Gocompare (see note 8 for more detail) and of the Group's share of joint venture profit (which is reported net of tax in the consolidated statement of comprehensive income), the Group incurred an effective tax rate of 20.0% in the six months ended 30 June 2015 (30 June 2014: 21.6%; 31 December 2014: 22.0%). 

 

8.         Acquisition of Gocompare Holdings.com Limited

On 31 March 2015, the Group acquired the outstanding 50% of the ordinary shares of Gocompare.  Following the acquisition, the Group owns 100% of the ordinary share capital of Gocompare and controls 100% of the voting rights.

Gocompare is an internet based price comparison website for financial and non-financial products.

 

The acquisition has been made to further the Group's strategy of diversifying its income streams with significant opportunities to grow Gocompare's revenues and profitability over the medium to long term.

 

Consideration transferred

 

The Group paid £96.2m in cash for the outstanding 50% of the ordinary share capital of Gocompare, being the £95.0m committed to as at 31 December 2014 and £1.2m arising as a result of the adjustment mechanism described in the Group's 2014 annual report and accounts.

 

In line with the requirements of IFRS 3, the Group's existing 50% interest in Gocompare was remeasured to fair value at the acquisition date, with the resulting gain of £63.8m recognised in the statement of comprehensive income as joint venture deemed disposal gain. This treatment effectively considers that the Group's existing interest is sold immediately prior to the acquisition at its fair value, and subsequently repurchased at the same value at the acquisition date. The fair value of the Group's existing interest immediately prior to the acquisition has been estimated to be equal to the fair value of consideration offered by the Group for the other 50% of Gocompare.

 

The table below summarises the provisional acquisition date fair values of each major class of consideration transferred:

 

			Reviewed
Cash (£m)			96.2
Fair value of existing interest in Gocompare (£m)			96.2
Total reported consideration			192.4

 

Acquisition-related costs

 

The Group incurred total acquisition related costs of £4.0m, of which £0.2m are included within other operating expenses for the six months ended 30 June 2015 (30 June 2014: £nil; 31 December 2014: £3.8m). These expenses are reported as non trading costs in the Group's segmental reporting (note 4).

 

Identifiable assets acquired and liabilities assumed

 

The following table summarises the book values of the identifiable assets and liabilities acquired and their fair values at the date of acquisition:

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

8.         Acquisition of Gocompare Holdings.com Limited (continued)

 

		Reviewed	Reviewed	Reviewed
		IFRS book values	Fair value adjustments	Fair value at the acquisition date
		£m	£m	£m
Assets
Gocompare brand		-	40.9	40.9
Gocompare customer relationships		-	10.2	10.2
Software		1.2	-	1.2
Intangible assets		1.2	51.1	52.3
Property, plant and equipment		1.4	-	1.4
Cash and cash equivalents		21.1	-	21.1
Other assets		14.0	-	14.0
Total assets		37.7	51.1	88.8
Liabilities
Other liabilities		(13.9)	(10.2)	(24.1)
Total liabilities		(13.9)	(10.2)	(24.1)
Net assets		23.8	40.9	64.7
Goodwill				127.7
Total reported consideration				192.4

 

 

Measurement of fair values

 

Identifiable intangible assets at the acquisition date include fair values of £40.9m for the Gocompare brand and £10.2m for Gocompare customer relationships. The brand and customer relationships were valued according to the relief-from-royalty method and the multi-period excess earnings method respectively.

 

The relief-from-royalty method considers the notional present value of estimated royalty payments that would be payable were the Gocompare brand to be licensed from a third party owner. A royalty rate of 10% of revenue was used for the Gocompare brand based on comparable royalty rates in the market place, applied to the brand's estimated useful economic life of five years.

 

The multi-period excess earnings method considers the present value of net cash flows expected to be generated by the Gocompare customer relationships over their estimated useful economic life of two years, by excluding from total cash flows any estimating cash flows relating to other contributory assets.

 

For all other assets the IFRS book values were considered to approximate fair value.

 

Goodwill

 

Goodwill arising on acquisition of £127.7m relates to future value derived from the Group having gained control of Gocompare, planned strategic developments and other intangible assets that do not qualify for separate recognition under IFRS 3. No goodwill is expected to be deductible for tax purposes.

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

8.         Acquisition of Gocompare Holdings.com Limited (continued)

 

Impact on reported revenue and profit after tax

 

Had the acquisition occurred on 1 January 2015, assuming that the same joint venture deemed disposal gain and fair value adjustments that arose at the date of acquisition had occurred on 1 January 2015, the adjustments to the Group's income, profit after tax and trading profit for the six months ended 30 June 2015 would have been as follows:

 

·      Increase in fees for additional services of £29.0m to £76.2m for the six months ended 30 June 2015 following inclusion of revenue relating to Gocompare;

 

·      Increase in profit after tax of £0.5m to £98.1m for the six months ended 30 June 2015, including £3.3m of additional other operating expenses relating to amortisation of acquired intangibles; and

 

·      Increase in consolidated trading profit of £3.4m to £55.2m for the six months ended 30 June 2015.

 

9.         Goodwill and intangible assets

	Goodwill		Software		Acquired brands		Customer relationships		Total
	£m		£m		£m		£m		£m
Cost
As at 1 January 2014	-		4.7		24.2		11.3		40.2
Additions in the year	-		2.8		-		-		2.8
As at 31 December 2014	-		7.5		24.2		11.3		43.0
Acquisition through business combination (note 8)	127.7		1.2		40.9		10.2		180.0
Additions in the period	-		2.3		-		-		2.3
As at 30 June 2015	127.7		11.0		65.1		21.5		225.3
Accumulated depreciation
As at 1 January 2014	-		2.9		12.9		10.8		26.6
Charge for the year	-		0.6		2.2		0.3		3.1
As at 31 December 2014	-		3.5		15.1		11.1		29.7
Charge for the period	-		0.5		3.2		1.3		5.0
As at 30 June 2015	-		4.0		18.3		12.4		34.7
Carrying amount
As at 31 December 2014	-		4.0		9.1		0.2		13.3
As at 30 June 2015	127.7		7.0		46.8		9.1		190.6

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

9.         Goodwill and intangible assets (continued)

Goodwill of £127.7m as at 30 June 2015 relates to goodwill arising on the acquisition of Gocompare by the Group (see note 8).

Included in acquired brands and customer relationships are the Gocompare brand and the Gocompare customer relationships recognised on application of IFRS 3 to the acquisition of Gocompare.  The Gocompare brand had an estimated fair value at the date of acquisition of £40.9m and is being amortised on a straight-line basis over its estimated useful economic life of five years. The Gocompare customer relationships had an estimated fair value at the date of acquisition of £10.2m and is being amortised on a straight-line basis over its estimated useful economic life of two years.

Included in software as at 30 June 2015 is £3.2m relating to assets which are not yet available for use in the manner intended by management (30 June 2014: 1.3m; 31 December 2014: £2.9m). As a result, no depreciation has been charged on these assets during the six months ended 30 June 2015. Work on bringing these assets into a condition necessary for their intended use is expected to be completed in the six months ending 30 June 2016, after which the assets are expected to have a useful economic life of five years.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

10.       Property, plant and equipment

 

		Land and buildings		Fixtures, fittings and equipment		Total
		£m		£m		£m
Cost
As at 1 January 2014		11.6		7.3		18.9
Additions in the year		-		13.2		13.2
Revaluation of land and buildings		0.0		-		0.0
As at 31 December 2014		11.6		20.5		32.1
Acquisition through business combination (note 8)		-		1.4		1.4
Additions in the period		-		2.3		2.3
As at 30 June 2015		11.6		24.2		35.8
Accumulated depreciation
As at 1 January 2014		-		4.3		4.3
Charge for the year		0.1		1.1		1.2
Revaluation of land and buildings		(0.1)		-		(0.1)
As at 31 December 2014		-		5.4		5.4
Charge for the period		0.0		0.7		0.7
As at 30 June 2015		0.0		6.1		6.1
Carrying amount
As at 31 December 2014		11.6		15.1		26.7
As at 30 June 2015		11.6		18.1		29.7

Included in fixtures and fittings as at 30 June 2015 is £14.6m relating to computer hardware assets that are not yet available for use in the manner intended by management (30 June 2014: £8.6m; 31 December 2014: £12.5m). As a result, no depreciation has been charged on these assets during the six months ended 30 June 2015. Work on bringing these assets into a condition necessary for their intended use is expected to be completed in the six months ending 30 June 2016, after which the assets are expected to have a useful economic life of five years.

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

11.       Financial assets and liabilities

11.1    Financial assets

 

		Reviewed As at 30 June 2015		Reviewed As at 30 June 2014		Audited As at 31 Dec 2014
		£m		£m		£m
	Financial investments designated as fair value through profit or loss:
	Shares and other variable‑yield securities and units in unit trusts	41.5		40.8		40.5
	Debt securities and other fixed income securities	549.1		596.3		544.2
	Deposits with credit institutions	114.0		72.3		223.7
	Financial investments held for trading:
	Derivative financial instruments	0.4		0.6		1.3
	Financial investments at fair value through profit or loss	705.0		710.0		809.7
	AFS financial assets:
	Shares in unquoted equity investments	2.0		-		0.3
	Loans and receivables:
	Insurance and other receivables	165.8		147.5		152.9
	Cash and cash equivalents	47.5		20.4		25.1
	Total financial assets	920.3		877.9		988.0

Of the financial investments and cash above, £214.5m have a credit rating of AAA as at 30 June 2015 (30 June 2014: £234.4m, 31 December 2014: £350.1m), £202.5m have a credit rating of AA (30 June 2014: £165.5m, 31 December 2014: £143.7m), £179.6m have a credit rating of A (30 June 2014: £179.3m, 31 December 2014: £186.7m) and £114.4m have a credit rating of BBB or below, or are not rated (30 June 2014: £110.4m, 31 December 2014: £113.8m). The shares and other variable yield securities, units in unit trusts and derivative financial instruments as shown above are not subject to credit rating.

 

11.2     Financial liabilities

	Reviewed As at 30 June 2015	Reviewed As at 30 June 2014	Audited As at 31 Dec 2014
	£m	£m	£m
Financial liabilities held for trading:
Derivative financial instruments	0.3	0.2	0.4
Other financial liabilities:
Borrowings: 10 year Subordinated Notes	122.2	-	122.4
Insurance and other payables	18.6	9.9	10.8
Total financial liabilities	141.1	10.1	133.6

 

The £125m 10 year Subordinated Notes were issued by esure Group plc on 19 December 2014 at the rate of 6.75% per annum, with payments made biannually. Directly attributable fees were £2.9m. A payment of £4.2m was made in the six months ended 30 June 2015.

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

11.3      Fair value estimation

The Group's financial instruments are measured at fair value by reference to a fair value measurement hierarchy which is presented within the Group's financial statements for the year ended 31 December 2014.

 

In accordance with IFRS 13 Fair Value Measurement financial instruments held at fair value through profit or loss ("FVTPL") have been categorised into a fair value measurement hierarchy as follows:

 

Quoted prices (unadjusted) in active markets for identical assets or liabilities - (Level 1)

 

Inputs to Level 1 fair values are quoted prices (unadjusted) in active markets for identical assets. An active market is a market in which transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) - (Level 2)

 

Fair value measurements are derived from inputs other than quoted prices included in Level 1, if all

significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. The majority of assets classified as Level 2 are over the counter corporate bonds, where trades are less frequent owing to the nature of the assets. Inputs used in pricing the Group's level 2 assets include:

 

• Quoted prices for similar (i.e. not identical) assets in active markets;

 

• Quoted prices for identical or similar assets in markets that are not active, the prices are not

  current, or price quotations vary among market makers, or in which little information is released

  publically;

 

• Inputs that are derived principally from, or corroborated by, observable market data by

  correlation;

 

• For forward foreign exchange contracts, the use of observable forward exchange rates at the

  reporting date, with the resulting value discounted back to present value; and

 

• Other techniques, such as discounted cash flow analysis, which consider on a prudent basis the

  likely realisable value.

 

Inputs for the asset or liability that are not based on observable market data (unobservable inputs) - (Level 3)

 

Unobservable inputs have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date (or market information for the inputs to any valuation models). As such, unobservable inputs reflect assumptions about the inputs that market participants would use in pricing the asset.

 

If one or more of the significant inputs is not based on observable market data, the instrument is

included in Level 3.

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

 

11.3      Fair value estimation (continued)

 

The following table presents the Group's financial assets and liabilities measured at fair value:

At 30 June 2015	Level 1	Level 2	Level 3	Total fair value
	£m	£m	£m	£m
Financial assets
Assets at FVTPL:
Derivative financial instruments	-	0.4	-	0.4
Equity securities	41.5	-	-	41.5
Debt securities	141.9	407.2	-	549.1
Deposits with credit institutions	114.0	-	-	114.0
Total financial assets at FVTPL	297.4	407.6	-	705.0
AFS financial assets:
Unquoted equity securities	-	-	2.0	2.0
Financial liabilities
Derivative financial instruments	-	0.3	-	0.3
Total financial liabilities at FVTPL	-	0.3	-	0.3
Land and Buildings	-	-	11.6	11.6

 

At 30 June 2014	Level 1	Level 2	Level 3	Total fair value
	£m	£m	£m	£m
Financial assets
Assets at FVTPL:
Derivative financial instruments	-	0.6	-	0.6
Equity securities	40.8	-	-	40.8
Debt securities	129.3	467.0	-	596.3
Deposits with credit institutions	72.3	-	-	72.3
Total financial assets at FVTPL	242.4	467.6	-	710.0
Financial liabilities
Derivative financial instruments	-	0.2	-	0.2
Total financial liabilities at FVTPL	-	0.2	-	0.2
Land and Buildings	-	-	11.5	11.5

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

 

11.3      Fair value estimation (continued)

 

At 31 December 2014	Level 1	Level 2	Level 3	Total fair value
	£m	£m	£m	£m
Financial assets
Assets at FVTPL:
Derivative financial instruments	-	1.3	-	1.3
Equity securities	40.5	-	-	40.5
Debt securities	113.6	430.6	-	544.2
Deposits with credit institutions	223.7	-	-	223.7
Total financial assets at fair value	377.8	431.9	-	809.7
AFS financial assets:
Unquoted equity securities	-	-	0.3	0.3
Land and buildings	-	-	11.6	11.6
Financial liabilities
Derivative financial instruments	-	0.4	-	0.4
Total financial liabilities at fair value	-	0.4	-	0.4

 

The classification of each asset within the fair value hierarchy is determined by valuation techniques used in pricing each asset and the level of liquidity, as described in the Group's annual financial statements as at 31 December 2014. There are no changes to the fair value valuation techniques or measurement methods in the interim period. The Group's policy, should there be a change to the valuation techniques or level of activity in the market in which that asset is traded, is to transfer the asset between levels effective from the beginning of the reporting period. There were no transfers of financial assets or financial liabilities between levels during the six months ended 30 June 2015.

The Group held level 3 AFS financial assets of £2.0m as at 30 June 2015 (31 December 2014: £0.3m; 30 June 2014: £nil), representing an investment in an unquoted equity investment which has been valued using a discounted cash flow valuation model. In addition, under IFRS 13, land and buildings with a carrying value of £11.6m (31 December 2014: £11.6m, 30 June 2014: £11.5m) are classified as Level 3 assets. As stated in the Group's 2014 consolidated financial statements, owner-occupied properties are stated at their revalued amounts annually, as assessed by qualified external valuers, all with recent relevant experience. These values are assessed in accordance with the relevant parts of the current RICS Valuation Standards in the UK ("Red Book"). More frequent revaluations are performed by management to assess that the carrying amount does not materially differ from its fair value.

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

12.       Reinsurance assets and insurance contract liabilities

 

12.1    Analysis of recognised amounts

 

	Reviewed As at 30 June 2015 £m	Reviewed As at 30 June 2014 £m	Audited As at 31 Dec 2014 £m
Gross
Claims outstanding (before deduction of salvage    and subrogation) and claims handling expenses	606.6	632.4	597.3
Unearned premiums	269.8	260.9	254.4
Total insurance liabilities, gross	876.4	893.3	851.7
Recoverable from reinsurers
Claims outstanding	214.0	211.5	194.4
Unearned premiums	16.0	16.8	14.9
Total reinsurers' share of insurance liabilities	230.0	228.3	209.3
Net
Claims outstanding (before deduction of salvage and subrogation) and claims handling expenses	392.6	420.9	402.9
Unearned premiums	253.8	244.1	239.5
Total insurance liabilities, net	646.4	665.0	642.4

 

12.2    Claims development

              

The movements in claims reported, including claims handling expenses net of reinsurance, are shown below:

	Reviewed As at 30 June 2015	Reviewed As at 30 June 2014	Audited As at 31 Dec 2014
	£m	£m	£m
Net claims reserve
At beginning of period	368.3	416.8	416.8
Cash paid for claims settled in period/year	(186.8)	(193.5)	(382.3)
Change arising from:
Current year claims	211.9	209.5	423.8
Prior year claims	(36.2)	(46.6)	(90.0)
At end of period/year	357.2	386.2	368.3
Provision for claims handling costs	12.7	12.5	11.9
Salvage and subrogation	22.7	22.2	22.7
At end of period/year	392.6	420.9	402.9

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30 June 2015

12.2    Claims development (continued)

 

Claims incurred and claims handling expenses as disclosed in the consolidated statement of comprehensive income comprise:

 

	Reviewed As at 30 June 2015	Reviewed As at 30 June 2014	Audited As at 31 Dec 2014
	£m	£m	£m
Net claims incurred	175.8	162.9	333.9
Claims handling expenses	10.6	9.4	18.5
Claims incurred and claims handling expenses	186.4	172.3	352.4

 

13.       Related party transactions

 

Related party transactions during the six months ended 30 June 2015 were consistent in nature and scope with those disclosed in the Group's annual report and accounts for the year ended 31 December 2014.

 

14.       Risk management and principal risks and uncertainties

 

The Board is responsible for prudent oversight of the Group's business and financial operations, ensuring that they are conducted in accordance with sound business principles and with applicable law and regulation. The Group's 2014 Annual Report and Accounts provide details of the Group's risk management framework, organised around the core elements of Risk Strategy and Appetite, Risk Governance and the associated Risk Reporting.

 

The Group's risk management framework is dynamic and continues to be enhanced and developed to ensure it continues to meet the needs of the Group.

 

Principal risks and uncertainties

 

The Directors consider that the material risks and uncertainties facing the Group are:

 

Risk	Impact	Mitigation
Insurance Risk
Underwriting risk from pricing strategy - the risk of an inappropriate pricing strategy could lead to business being written at uneconomic rates and result in lower than expected profitability. This could be driven by internal pricing changes or changes in the rating environment within the market.	If the Group's general pricing strategy is not managed correctly, it could result in an unintended change in the Group's risk profile, market share and loss ratio.	The Group continues to monitor developments through regular sensitivity testing of the key variables affecting loss performance, including loss ratios, risk mix, pricing, quote conversion, renewal retention ratios, claims costs, claims frequency and the adequacy of reserves. Action regarding these risks is taken in an integrated approach between the executive team, underwriting, claims and risk management. There is strong and regular monitoring in place to understand and react to the changing market rating environment, ensuring that we are well placed to benefit from any movements.
Underwriting risk from claims costs - the risk that a material increase in claims costs could negatively impact the Group's financial performance. This includes risks arising from adverse claims litigation outcomes, increases in frequency of PPOs and potential changes to the Ogden discount rate.	An unplanned deterioration in the loss ratio, arising from inflation in claims costs beyond planned and achievable increases in premiums.	Loss ratio risk is managed through a robust claims management process and regular monitoring and sensitivity testing of the key variables affecting loss performance, including risk mix, pricing relative to the market, quote conversion and renewal retention ratios, claims costs, claims frequency and the adequacy of reserves.
Reserving risk - the risk that insufficient funds have been set aside to settle and handle claims as the amounts fall due.	Adverse development in prior year reserves resulting in deterioration of financial performance.	We have a prudent approach to reserving risk - the Group's actuarial function analyses and projects historical claims development data and uses a number of actuarial techniques to both test and forecast claims provisions. In addition, the Group also provides data to independent external actuaries who assess the adequacy of the Group's claims provisions. Apart from historical analysis, the Group also takes into account changes in risk profile and underwriting policy conditions, changes in legislation or regulation and changes in other external factors (including assumptions on PPOs) and potential changes to the Ogden discount rate.
Financial Risk
Financial risk - the risk that inaccurate financial estimates or judgements could misrepresent our financial position and change key strategic decisions.	The preparation of financial information requires management to make judgements, estimates and assumptions. Actual results may differ from these estimates, which could impact key business decisions.	The Group reviews financial estimates and underlying assumptions on an ongoing basis taking into account changes in underwriting conditions, changes in legislation or regulation, and market movements. In addition, independent external actuaries assess the adequacy of the Group's technical provisions. Ultimately, the oversight of the Group's material financial estimates and judgements resides with the Audit Committee.
Market risk
Market risk from investment activity - the risk that a negative financial impact arises from holdings in interest rate, currency and equity products, all of which are exposed to general and specific market movements.	Changes in UK interest rates or investment markets impact the return on and market valuation of the Group's investment portfolio.	Our investment strategy does not expose the Group to material currency risk or the risks arising from active trading of derivatives. Market risk is managed through regular monitoring, including the drivers of investment return and value at risk measures, counterparty exposures and interest rate sensitivities.
Default risk from investment counterparty -the risk that an investment counterparty will not be able to pay amounts in full when due in accordance with the term of the contract, causing the Group to incur a financial loss.	Defaults from investment counterparties impact both the income from, and market valuation of, the Group's investment portfolio.	The Group manages the level of investment counterparty credit risk it accepts by placing limits on its exposure to a single counterparty or groups of counterparties, and on geographical counterparties and geographical segments. Such risks are subject to regular review within the Investment Committee. At 30 June 2015, the Group had no direct exposure to peripheral Eurozone countries sovereign debt.
Counterparty Credit Risk
Credit risk from reinsurance counterparty - the largest counterparty credit risk we are exposed to relates to reinsurers. This risk arises if they are not able to pay amounts in full when due in accordance with the terms of the contract, causing the Group to incur a financial loss.	Reinsurance counterparty defaults reduce the protection provided through our prudent reinsurance structure. This will have a direct impact on the reinsurance asset and earnings in the year of default. In addition, the reduction in the level of reinsurance due to the default may increase the volatility in earnings in subsequent years.	The creditworthiness of reinsurers is managed by reviewing their financial strength prior to finalisation of any contract ensuring it is in line with the risk appetite. In addition, management assesses the creditworthiness of all reinsurers by reviewing credit grades provided by rating agencies and other publicly available information, as well as the concentration risk within different reinsurers and the Group. An analysis of reinsurers by Standard & Poor's and AM Best ratings is produced and reviewed on a quarterly basis.
Conduct Risk
Conduct Risk - The risk we conduct ourselves, culturally and operationally, in a manner that is disadvantageous to our clients and cause them detriment.	Potentially resulting in reputational issues and regulatory censure.	Our culture and tone from the top ensures the interests of our customers and their fair treatment is paramount. We have a strong governance framework and our Conduct Risk and Customer Committee reviews all aspects of our customer service. Board oversight is ensured by upward reporting of a suite of Conduct Risk Appetite statements and measures.
Liquidity Risk
Liquidity risk - the risk that the Group, although solvent, does not have available sufficient financial resources to enable it to meet its obligations as they fall due or can only secure them at excessive cost.	A reduction in liquidity could have an impact on our ability to meet our financial commitments as they fall due or restrict our ability to pay dividends to shareholders.	The Group continues to monitor its liquidity risk by considering the Group's operating cash flows, stressed for catastrophe scenarios, dividend payouts, liquidity strains and investment strategy to mitigate this risk. The Group also considers the matching of the investment portfolio with its insurance liabilities to mitigate and manage this risk. Oversight of the Group's investment strategy and the associated liquidity risk is undertaken by the Investment Committee.
Operational Risk
Financial crime - the risk that there is an increase in losses through crime.	Increased exposure to actual or attempted financial crime activity could result in financial loss, reputational impact or regulatory intervention.	A range of preventative, monitoring and detective controls are in place to combat such fraudulent activity at the key points of entry - policy inception and claims. The monitoring and mitigation of financial crime is managed by the Group's financial crime team supported by the rest of the Business.
Data Security - the risk of compromise to the integrity, confidentiality or availability of customer or staff personal information, or of commercially sensitive information.	This could have a detrimental impact on our customers or staff, on the reputation of the Group, or on our profitability and share price. There is also the potential for regulatory intervention or fines resulting from such a compromise.	The Group has robust systems in place to mitigate such risks, including perimeter firewalls and intrusion detection systems, anti-virus protection, laptop encryption, logical and physical access restrictions, rigorous vetting of new and existing staff and a clear desk policy. These controls are rigorously enforced within the Group.
Systems failure - the risk that the current systems fail to deliver the expected performance.	The failure or degradation of our key platforms (including websites from which the majority of new business is sourced), compromise of corporate data or, in particular, the personal data with which we are entrusted and material performance failures by key infrastructure suppliers.	The Group has systems monitoring and incident management processes in place to mitigate this risk. A key element to the prevention of this risk is a robust change management programme which is subject to rigorous project management disciplines from programme development through to deployment. The Group has a Reportable Events process which reports and manages any systems failure, which is reported to the Board Risk Committee.
Price Comparison Websites - The Group, both directly and through its subsidiary Gocompare, is dependent on the UK price comparison market for new business and growth. This is a highly competitive, but concentrated, market in which the dynamics could change materially. This could both impact Gocompare and the car and home insurance market.	The impact of this could be a material reduction in new customers to esure or a reduction in conversion volumes on gocompare. This could be caused by disruption in the market by competition, new technology, changes to consumer behaviour or regulation.	The ownership of Gocompare partially mitigates this risk which also enables the group to monitor the developments within the channel.
Legal & Regulatory Risk
Regulatory or legal intervention or changes - the risk that legal or regulatory reforms could negatively impact the Group's financial performance or position.	There are a number of ongoing and future regulatory reviews of the general insurance retail sector. These reviews could have an impact on the revenue streams that we currently have in place and future revenue streams.	The Group continues to monitor legal and regulatory developments in the UK and Europe, through our close relationship with our regulators (the FCA and PRA) and other official bodies and the use of proactive risk management tools and processes to mitigate our exposure to regulatory risk. There is continued focus on the evolution of additional insurance products and how we sell these products with the customer in mind.
Solvency II
Solvency II implementation - the risk that Solvency II is not appropriately implemented within esure or that there are unforeseen changes that impact the capital position. In addition, the focus on management in meeting the needs of Solvency II increases the likelihood of another risk arising.	Until Solvency II is implemented in January 2016 there remains some uncertainty regarding the potential implications on esure and the market.	The Group continues to monitor developments and engage with the PRA to ensure that we are able to mitigate potential issues before they arise. The current risk management, actuarial and finance teams have been enhanced to ensure that there are appropriately skilled individuals available to implement the Solvency II requirements effectively.

 

 

 

 

 

 

DIRECTORS' RESPONSIBILITY STATEMENT IN RESPECT OF THE HALF YEARLY ANNUAL REPORT

 

We confirm that to the best of our knowledge:

The condensed consolidated financial statements for the six months ended 30 June 2015 have been prepared in accordance with International Accounting Standard 34 ("IAS 34") as adopted by the EU.

The interim management report includes a fair review of the information as required by:

·      DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of the important events that have occurred during the first six months of the current financial year and their impact on the condensed set of consolidated financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially impacted the financial position or performance of the Group during the period; and any changes in the related party transactions from the Group's consolidated financial statements for the year ended 31 December 2014 that could do so.

 

 

 

 

 

Stuart Vann                                                                 Darren Ogden

 

Chief Executive Officer                                                   Chief Finance Officer     

 

 

Signed on behalf of the Board on 7 August 2015