# Homeowners premium measures and statistics

<table><tr><td></td><td>2017</td><td>2016</td><td>2015</td></tr><tr><td>PIF (thousands)</td><td>79</td><td>58</td><td>32</td></tr><tr><td>New issued applications (thousands)</td><td>34</td><td>37</td><td>28</td></tr><tr><td>Average premium</td><td>$         917</td><td> $         875</td><td> $         833</td></tr><tr><td>Renewal ratio (%) (1)</td><td>85.5</td><td>82.6</td><td>81.9</td></tr><tr><td>Approved rat(2)e changes :</td><td></td><td></td><td></td></tr><tr><td># of locations (3)</td><td>4</td><td>1</td><td>N/A</td></tr><tr><td>Total brand (%)</td><td>5.1</td><td>(0.5)</td><td>N/A</td></tr><tr><td>Location specific (%)</td><td>14.3</td><td>(10.0)</td><td>N/A</td></tr></table>

(1) Esurance’s renewal ratios exclude the impact of risk related cancellations during the new business underwriting period. Customers can enter into a policy without a physical inspection. During the underwriting review period, a number of policies may be canceled if upon inspection the condition is unsatisfactory.

(2) Rate changes were approved in 4 states, totaled \$2.9 million in 2017. Rate changes were only approved in Texas in 2016. No rate changes were approved in 2015. N/A reflects not applicable.

(3) Esurance brand operates in 31 states and 2 Canadian provinces.

Homeowners insurance premiums written totaled\$79 million in 2017 compared to \$56 million in 2016. Factors impacting premiums written were:

• 21 thousand increase in PIF as of December 31, 2017 compared to December 31, 2016.

• 3 thousand decrease in new issued applications in 2017 compared to 2016 due to reduced marketing activities.

• 4.8% increase in average premium in 2017 compared to 2016, primarily due to increased premium distribution in higher average premium states and rate changes. As of December 31, 2017, Esurance is writing homeowners insurance in 31 states with lower hurricane risk, contributing to lower average premium compared to the industry.

Homeowners insurance premiums written totaled\$56 million in 2016 compared to \$30 million in 2015. Factors impacting premiums written were:

• 26 thousand increase in PIF as of December 31, 2016 compared to December 31, 2015.

• 9 thousand increase in new issued applications in 2016 compared to 2015.

• As of December 31, 2016, Esurance was writing homeowners insurance in 31 states with lower hurricane risk.

# Combined ratios by line of business

<table><tr><td rowspan="3"></td><td colspan="9">For the years ended December 31,</td></tr><tr><td colspan="3">Loss ratio (1)</td><td colspan="3">E(1)xpense ratio </td><td colspan="3">Combined ratio</td></tr><tr><td>2017</td><td>2016</td><td>2015</td><td>2017</td><td>2016</td><td>2015</td><td>2017</td><td>2016</td><td>2015</td></tr><tr><td>Auto</td><td>77.5</td><td>75.8</td><td>75.3</td><td>24.8</td><td>28.2</td><td>34.0</td><td>102.3</td><td>104.0</td><td>109.3</td></tr><tr><td>Homeowners</td><td>83.8</td><td>78.6</td><td>63.2</td><td>45.6</td><td>161.9</td><td>136.8</td><td>129.4</td><td>240.5</td><td>200.0</td></tr><tr><td>Other personal lines</td><td>50.0</td><td>62.5</td><td>57.1</td><td>37.5</td><td>37.5</td><td>42.9</td><td>87.5</td><td>100.0</td><td>100.0</td></tr><tr><td>Total</td><td>77.6</td><td>75.8</td><td>75.1</td><td>25.7</td><td>31.7</td><td>35.2</td><td>103.3</td><td>107.5</td><td>110.3</td></tr></table>

(1) Ratios are calculated using the premiums earned for the respective line of business.

# Loss ratios by line of business

<table><tr><td rowspan="3"></td><td rowspan="2" colspan="3">Loss ratio</td><td colspan="6">For the years ended December 31,</td><td rowspan="2" colspan="3">Effect of catastrohpe
losses included in prior
year reserve
reestimates on
combined ratio</td></tr><tr><td colspan="3">Effect of catastrohpe
losses on combined
ratio</td><td colspan="3">Effect of prior year
reserve reestimates on
combined ratio</td></tr><tr><td>2017</td><td>2016</td><td>2015</td><td>2017</td><td>2016</td><td>2015</td><td>2017</td><td>2016</td><td>2015</td><td>2017</td><td>2016</td><td>2015</td></tr><tr><td>Auto</td><td>77.5</td><td>75.8</td><td>75.3</td><td>2.1</td><td>1.5</td><td>0.7</td><td>0.1</td><td>(1.3)</td><td>(1.1)</td><td> —</td><td> —</td><td> —</td></tr><tr><td>Homeowners</td><td>83.8</td><td>78.6</td><td>63.2</td><td>23.5</td><td>28.6</td><td>15.8</td><td>(3.0)</td><td> —</td><td> —</td><td>(1.5)</td><td> —</td><td> —</td></tr><tr><td>Other personal lines</td><td>50.0</td><td>62.5</td><td>57.1</td><td> —</td><td> —</td><td> —</td><td>(12.5)</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td></tr><tr><td>Total</td><td>77.6</td><td>75.8</td><td>75.1</td><td>2.9</td><td>2.2</td><td>0.9</td><td>(0.1)</td><td>(1.3)</td><td>(1.1)</td><td>(0.1)</td><td> —</td><td>0.1</td></tr></table>

Auto loss ratio increased 1.7 points in 2017 compared to 2016, primarily due to unfavorable prior year reserve reestimates in 2017 compared to favorable prior year reserve reestimates in 2016 and higher catastrophe losses. Auto loss ratio increased 0.5 points in 2016 compared to 2015, primarily due to higher claim frequency and catastrophe losses, partially offset by increases in premiums earned.

Catastrophe losses were \$50 million in 2017 compared to \$36 million in 2016 and \$14 million in 2015.

# Expense ratios by line of business

<table><tr><td rowspan="2"></td><td colspan="3">For the years ended December 31,</td></tr><tr><td>2017</td><td>2016</td><td>2015</td></tr><tr><td>Auto</td><td>24.8</td><td>28.2</td><td>34.0</td></tr><tr><td>Homeowners</td><td>45.6</td><td>161.9</td><td>136.8</td></tr><tr><td>Other personal lines</td><td>37.5</td><td>37.5</td><td>42.9</td></tr><tr><td>Total expense ratio</td><td>25.7</td><td>31.7</td><td>35.2</td></tr></table>

# Impact of specific costs and expenses on the expense ratio

<table><tr><td rowspan="2"></td><td colspan="3">For the years ended December 31,</td></tr><tr><td>2017</td><td>2016</td><td>2015</td></tr><tr><td>Amortization of DAC</td><td>2.4</td><td>2.5</td><td>2.5</td></tr><tr><td>Advertising expense</td><td>8.3</td><td>11.2</td><td>12.6</td></tr><tr><td>Amortization of purchased intangible assets</td><td>0.2</td><td>1.4</td><td>2.2</td></tr><tr><td>Other costs and expenses</td><td>14.6</td><td>16.6</td><td>17.9</td></tr><tr><td>Restructuring and related charges</td><td>0.2</td><td>—</td><td>—</td></tr><tr><td>Total expense ratio</td><td>25.7</td><td>31.7</td><td>35.2</td></tr></table>

Expense ratio decreased 6.0 points in 2017 compared to 2016. Esurance uses a direct distribution model, therefore its primary acquisition-related costs are advertising as opposed to commissions. Esurance advertising expense ratio decreased 2.9 points in 2017 compared to 2016, primarily due to reductions in homeowners marketing. Other costs and expenses, including salaries of phone sales personnel and other underwriting costs related to customer acquisition, were lower in 2017 compared to 2016 due to the implementation of process efficiencies. Expense ratio includes amortization of purchased intangible assets from the original acquisition in 2011. Starting in 2017, the portion of the remaining purchased intangible asset related to the Esurance brand name was classified as an infinite-lived intangible and is no longer being amortized, but instead tested for impairment on an annual basis.

We continue to review our advertising spend to ensure our acquisition costs meet our targeted returns. Esurance incurs substantially all of its acquisition costs in the year of policy inception. As a result, the Esurance expense ratio will be higher or lower depending on the advertising expenditures incurred related to our profitability actions. Esurance’s annual combined ratio is below 100, after the year of policy inception (in which substantially all acquisition costs are incurred), driven by pricing changes, customer mix and renewal experience.

Expense ratio decreased 3.5 points in 2016 compared to 2015. Esurance has continued to invest in growth, including offering a comprehensive suite of products such as homeowners, motorcycle and usage-based insurance as well as expanding into the Canadian market. Esurance advertising expense ratio decreased 1.4 points in 2016 compared to 2015 in conjunction with our profitability actions. Strategic reductions in marketing spending were made on auto while homeowners advertising spending was increased. Other costs and expenses, including salaries of phone sales personnel and other underwriting costs related to customer acquisition, were lower in 2016 than 2015.