LV= profits despite £43m underwriting loss

LV= chief executive John O’Roarke has vowed that the business will return to underwriting profitability in 2011.

O'Roarke predicts the insurer's combined ratio, which hit 104.2% in 2010, could be as low as 97%.

“We are very confident about getting a combined ratio below 100% and hitting 97% or 98% in 2011,” he said.

LV=’s GI business made a profit before tax of £35m in 2010, almost 18 times the £2m it made in 2009. The profit was driven by a four-fold increase in trading profit (underwriting result plus investment income) from £7m to £30m.

However, the 2010 trading profit comprises £73m of investment income offset by £43m of underwriting loss. This compares with £41m of investment income offset by £34m of underwriting loss in the previous year.

LV=’s 2010 combined ratio of 104.2% was a slight improvement on 2009’s 104.3%. Excluding claims for the UK freeze, which pushed the insurer’s claims costs £30m higher than normal, the combined ratio was 101%.

O’Roarke praised LV=’s combined ratio in a year when he predicts that industry-wide motor ratios will come in at between 112% and 115% as a result of rising bodily injury claims.

Overall, LV=’s gross written premium (GWP) grew 46% to £1.2bn in 2010 from £811m in 2009.

GWP in direct car insurance increased 42% to £378m. The broker channel saw particularly strong growth in GWP, by 64% to £657m. Within the broker segment, motor personal lines sales grew by 68% to £546m.

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