A much improved commercial lines performance helps drive improved underwriting result
Aviva has reported its best combined operating ratio (COR) in the UK for seven years, amid falling expenses and favourable reserve releases.
The insurer reported a UK and Ireland COR of 94.3% for the first six months of 2014, an improvement of two percentage points on the 96.3% reported in H1 2013.
This resulted in a 46% increase in its underwriting profit to £114m (H1 2013: £78m).
However, poor investment returns as a result of an inter-company loan resulted in UK general insurance operating profit growing by just 5% to £251m.
The improved underwriting was largely driven by improved fortunes in Aviva’s commercial book, with the insurer reporting a much improved commercial COR of 92%, down from 99% for the first six months of 2013.
Motor continued to be a profitable line for the insurer with a COR of 95% (H1 2013: 96%), but home insurance suffered from increased claims as a result of flooding in Q1 to report a five percentage point worsening of its COR to 95%.
Gross written premium (GWP) fell over the period for both commercial and personal lines.
Personal lines GWP was down 8.2% to £1.1bn, while the commercial lines book shrank 3.1% to £900m.
Group chief executive officer Mark Wilson said: “The half-year results show that momentum in Aviva’s turnaround continues. All of our key metrics have improved, operating earnings per share are up 16%, and book value has increased 7%.
“We have reduced our debt, decreased expenses and increased profit – this is just good business. Aviva remains a work in progress, and these results are a step in the right direction.”
At the group level, Aviva reported a 4% increase in operating profit to £1.1bn (H1 2013: £1.0bn) with a COR of 95.5%, 0.7 percentage points better than the 96.2% reported for the same period last year.