Aviva recorded a net reserve strengthening across its UK general insurance business of £12m in the first half of 2011. This compares with a net release of £32m in the first half of 2010.
Aviva’s UK general insurance chief executive David McMillan said some of the strengthening was for prior years on the commercial motor book and some was for commercial property and household as a result of the December 2010 winter freeze.
However, McMillan played down the size of the reserve hike. “If you set £12m against the total reserves of just under £4bn it is marginal at the Aviva group level,” he said.
While Aviva’s personal lines business made an underwriting profit of £67m in the first half of 2011, the commercial business made an underwriting loss of £12m. This was mainly driven by an £18m loss in the commercial motor book, slightly offset by a £4m profit in commercial property and a £2m profit in other commercial business.
The combined ratio for the commercial motor book was 106% in the first half of 2011, compared with 98% in the first half of 2010.
Improvements in commercial motor could be on the way. McMillan said commercial motor rates had started to harden significantly. However, he added: “The commercial market in the UK continues to be very challenging. We have got soft market conditions in non-motor. Commercial property and liability trading remains quite difficult.”
Overall, Avivas UK GI result for the first half of 2011 was a improvement over the same period last year. Operating profit increased 6% to £242m and net written premiums increased 14% to £2.2bn. The combined ratio improved two points to 96%.
“We have continued the great momentum we’ve had in 2010 on both top and bottom line,” McMillan said. “We’re really pleased we have continued to improve our combined ratio.”
