COR falls to 98.2% despite 100.7% motor COR and 112.4% travel COR

Ageas UK made a net profit of £73.7m in the first nine months of 2013, up 5.6% on the £69.8m it made in the same period last year.

The improvement came despite a 60% slump in profit at its Tesco Underwriting motor and household joint venture with Tesco Bank.

Ageas attributed the overall improvement to maintaining pricing discipline in motor, a “prudent approach” to protecting against volatile weather events, and the contribution from the Groupama UK business it bought at the end of 2012.

The combined operating ratio (COR) improved by 0.4 percentage points, which Ageas put down to an “excellent” performance in household business because of benign weather claims and improvements, better motor and travel loss ratios, and a four-point improvement in the commercial and special risks COR to 101.3% from 105.4%.

The improvements came despite a four-point deterioration in the motor COR to 100.7% and a 5.9 point worsening of the travel insurance COR to 112.4%.

Despite cutbacks to improve profitability in certain areas, such as commercial and special risks, Ageas’s non-life gross written premium (GWP) increased by 7.1% to £1.4bn (first nine months of 2012: £1.3bn).

Ageas UK chief executive Andy Watson said: “It is very pleasing to see improvements in our income, profit and combined ratio which incorporates the addition of our strongly performing Groupama acquisition and the relatively benign weather conditions year-to-date.

“Our promise to offer more products to more brokers remains important to us and we will continue to focus on supporting brokers through a difficult trading environment.

“The market remains competitive, especially in motor, where rates have decreased significantly. Our goal is to maintain our underwriting discipline and continue to write good and sustainable business, providing our customers with the high levels of service they have come to expect from Ageas.”

Tesco slump

Ageas’s share of profits from Tesco Underwriting dropped to £4.3m in the first nine months of 2013 from £10.8m in the same period last year.

The loss reflects falling premium as well as reserve strengthening for small bodily injury claims.

GWP at the joint venture dropped 28% to £341.1m (first nine months of 2012: £474.1m).

Ageas said Tesco Underwriting is focusing on maintaining price discipline in the competitive motor market, and focusing on Tesco Clubcard members, which it says is improving the business’s risk profile.

Ageas owns 50.1% of the Tesco Underwriting venture.

Groupama contribution

The decline at Tesco was more than offset by the contribution from Groupama UK business, which has now dropped the Groupama brand. The acquired company contributed £252.2m in GWP and £11.7m in net profit to the group.

Broking improvement

Ageas UK’s retail broking arm also improved its results. Net profit was up 7% to £19.9m (first nine months of 2012: £18.6m), although this was helped by a £2.6m one-off deferred tax benefit.

Ageas said that in light of the competitive market, it had taken actions to cut costs in its retail broking business by 10.7% compared with the first nine months of 2012.

Total income from Ageas’s ‘other insurance’ activities, which includes retail broking, were down 13.1% to £137.4m from £158.1m because of the competitive environment.

Overall profit for the other insurance division was down 6% to £9.9m because of increased administration and financing costs related to the expansion of the business.

Ageas nine-month 2013 results in £m (except where stated)

 Nine-month 2013Nine-month 2012change
Other (including retail)137.4158.1-13.1%
Life protection67.249.7+35.2
Net profit   
Other (including retail)9.910.5-5.7%
Life protection(1.5)0.3Not meaningful
Key ratios (%)   
Total COR98.298.6-0.4pp
Motor COR100.796.7+4pp
Household COR86.3101.3-15pp
Travel COR112.4106.5+5.9pp
Commercial and special risks COR101.3105.4-4.1pp