Commercial COR drops below 100% for first time but challenges remain at retail and Tesco Underwriting

Ageas UK made a net profit of £64.8m in the first nine months of 2014, down 12% on the £73.7m it made in the same period last year.

The combined operating ratio (COR) for the first nine months of the year was 99.3% - 2.4 percentage points worse than the 96.9% the company reported in the first nine months of 2013.

This was despite a strong third quarter, where net profit was up 56.5% to £38.5m (Q3 2013: £24.6m). The third quarter COR improved by 1.4 points to 96.6% (Q3 2013:

The lower nine-month profitability was caused by weather claims, which pushed the company into loss in the first quarter of 2014 and dragged down the result for the rest of the year to date.

Total income for the first nine months of 2013  was flat at £1.6bn, despite a 7.8% fall in income from Ageas’s retail broking businesses. Non-life gross written premium was also stable at £1.4bn despite falling rates in personal motor.

Ageas UK chief executive Andy Watson said: “I’m pleased to report that we’ve seen a strong third quarter result, continuing our recovery from the impact of the weather earlier in the year and despite lower average premiums in the market.

Our ability to turn this around against the current tough market conditions, while maintaining our underwriting discipline and delivering significant changes within our business, show that we remain in good shape.

Significant progress continues on the integration of our two insurance businesses, while we are taking action to improve expenses and build long term growth within our Retail business. Our brokers, partners and customers continue to recognise the high levels of service we provide and I’m very proud that we have now achieved the Investors in Customers ‘Exceptional’ accreditation for customer satisfaction.”

Commercial improvement

One of the success stories for Ageas UK in the first nine months of 2014 was its overall commercial book, including motor, which made an underwriting profit for the first time.

The total commercial lines COR, including motor, improved by 4.9 percentage points to 96.9% in the first nine months of 2014 from 101.8% in the same period last year.

But the performance of company’s commercial and specialty risks book, which excludes commercial motor, deteriorated. Its COR  increased by 4.3 points to 105.6% (First nine months of 2013: 101.3%).

Tesco Underwriting and retail

The company also continued to face challenges from its Tesco Underwriting joint venture with Tesco Bank and its retail businesses.

Ageas’s share of Tesco Underwriting’s result was a loss of £1.4m in the first nine months of 2014, compared with a £4.3m profit in the same period last year.

Ageas owns 50.1% of Tesco Underwriting.

The retail businesses saw their profit fall by 47% to £10.6m in the first nine months of 2014 from £19.9m in the same period last year.

Ageas attributed this to a 7.8% drop in revenue to £126.6m (first nine months of 2013: £137.4m), which the company said reflected “a tough and highly competitive environment leading to lower volumes and margins”.

But Ageas said the turnaround plan for its retail business, which includes cutting costs and merging its seven legal entities into one, “remains on track”.

Ageas nine-month 2014 results

 Nine-month 2014Nine-month 2013Change
Income (£m)   
Other (including retail)126.6137.4-7.9
Life protection80.967.220.4
Net profit (£m)   
Other (Including retail)20.89.9110.1
Life protection1.6-1.5-206.7
CORs (excluding Tesco Underwriting) (%)  
Accident and health103.5112.4-8.9
Commercial and special risks105.6101.34.3