Insurer posts 20% drop in net written premium and operating profit, and pledges growth in 2010
Aviva’s head of UK general insurance, David McMillan, said 2009 was the “low water mark” for the business as the insurer posted results revealing that £1.1bn had been wiped off its premium.
Aviva’s UK general insurance business reported net written premium of £4.3bn in 2009, down from £5.41bn in 2008. Operating profit before tax was significantly down as well, dropping from £656m to £535m.
This was against a group operating profit before tax of £2.02bn, compared with £2.4bn in 2008.
The fall comes after a year of well-publicised rate rises and rows over commissions with some of the country’s largest brokers.
McMillan said Aviva would look to rebuild its premium in 2010. “Clearly the challenge for me and the new management team is to start to grow the business profitably. We look on 2009 as the low water mark in terms of the size of our business.”
McMillan reiterated earlier admissions by UK chief executive Mark Hodges that Aviva had called the market wrong in early 2009, expecting rate rises that did not materialise. He said it would be “fair to say” that the insurer was now more flexible on rates, and said it was “in the middle of the pack” on pricing compared to its peers.
McMillan said the top line had also taken a hit from the creditor market, where Aviva is the leading insurer. The impact of the recession on unemployment, coupled with regulatory intervention, had increased costs and limited the size and attractiveness of the market, he said.
Growth plans for 2010 include an increase in broker personal lines, where a new pricing structure has been introduced, and the RAC motor business, which will continue to feature on aggregators, unlike the main Aviva brand.
Aviva has also re-entered the corporate risks arena. McMillan said the insurer had had a good start to the year on this line, and was on course to meet its target of £80m of new business by the end of the year.
Asked if Aviva would look to rebuild its books of business with the larger brokers, McMillan said: “We’ve got reasonably long-standing relationships with all the consolidators and open lines of communication, and we will look at business deal by deal. I’m not keen to write what I would describe as gravity-defying deals.”
This week’s results also showed that, group-wide, Aviva has reduced its headcount by nearly one-fifth. McMillan said: “The era of big-ticket closures and centralisation is hopefully over for us in the short term.”