Insurer considering several options to replace its S&P rating

Andy Watson, Ageas

Ageas UK was able to hold its overall revenue stable in a tough market by growing its motor insurance book, according to chief executive Andy Watson.

This is despite a tough competitive environment and falling rates, which have prompted rivals to pare back their motor books.

Speaking to Insurance Times following the release of Ageas’s nine-month results this morning, Watson said the company had seen a year-on-year increase of 135,000 policies.

He said: “We have increased the motor book in spite of the market conditions,” he said. But he insisted that the company had not slackened off on underwriting controls to write more business.

Watson said: “We are very mindful that we need to maintain pricing and underwriting discipline and so we are absolutely growing our book in that context.”

He added: “We have a lot of data and are improving the data we use in our pricing. We think we have got very robust anti-fraud mechanisms in place both at quote and at claims stage.

“It is the confidence of the robustness of our pricing and underwriting backed up by things like our anti-fraud controls that give us the confidence to write where we do write – and we don’t write everywhere.”

Watson agreed with his peers that there were some signs of an increase in motor rates, but added that it was too early to tell whether sustained rate rises are on the way.

Pricing pressure

He said: “There are early indications of an uptick, but like a number of people we are not getting too excited about that  because we have seen it before. If it is an uptick and it continues then we will be very pleased to see that but we are not getting ahead of ourselves.”

He added that the company was keeping a close eye on trends in bodily injury claims frequency and cost, which some companies believe are on the increase.

“We are monitoring that situation and we will need to have our pricing plans accordingly, but that has always been the case.”

Seeking a rating

Also on Watson’s to-do list is securing a full, interactive rating for Ageas UK’s insurance company, Ageas Insurance Limited (AIL), which it hopes to do by 2015.

AIL was rated BBBpi by Standard & Poor’s (S&P), but the rating agency has decided to stop issuing ratings with a ‘pi’ suffix, which are unsolicited by the rated company and based on publicly-available information.

Interactive ratings are actively sought by the rated company and are more in-depth, drawing on interviews with senior management and information not available in the public domain.

S&P’s decision means AIL technically does not have a rating, although Watson points out that S&P reaffirmed AIL’s BBBpi rating before withdrawing it, and such ratings typically last for a year before being reviewed.

“We have got a situation where we have got a very recently affirmed ‘pi’ rating and I think our trading partners understand that. As we move forward we will be looking to understand what we can do in the new world with no PI ratings, and we will work towards and interactive rating in the next few months.”

The company is considering several routes to an interactive rating for AIL, including taking advantage of its parent’s rating . Ageas group’s main insurance entity, AG Insurance, is rated A- by S&P, A2 by Moody’s and A+ by Fitch.

Watson said: “We will look across the rating agencies. We will also look at the options available, given that we are, and other rating agencies have acknowledged and recognised that we are, strategically important to Ageas group, which is rated. [We are considering] whether we should link more formally to Ageas group or do something on our own.

“All of these options are open to us. We are pursuing and thinking them through. We will work towards an interactive rating so we get ourselves out of this current situation.”