NWP drops 6% as company makes cuts to SME commercial lines and personal motor

Aviva’s UK general insurance business made an operating profit of £431m in 2013, down 6.1% on the £459m it made in 2013.

The reduction was caused by lower investment return, which fell to 3.2% of invested assets (2012: 4.2%).

The company also saw a 6% drop in net written premium (NWP) to £3.82bn (2012: £4.06bn). It attributed this to a £123m cut in SME commercial lines as it too remedial action to improve the profitability of the book, and a £107m cut in personal motor as a result of “disciplined underwriting in a competitive market”.

Speaking to journalists this morning, Aviva UK and Ireland general insurance chief executive Maurice Tulloch reaffirmed the insurer’s commitment to UK brokers.

He said: “Since I came over late last September I’ve met with hundreds of brokers. One of the things you’ve got to understand with Aviva is brokers are our life blood.

“We’re investing significantly in technology and new products, new innovations, we’re investing heavily in digital. Our future includes broker here in the UK and I’m very bullish on their future and our future.”

Improved underwriting

The company’s combined operating ratio (COR) improved by 1.3 percentage points to 97% (2012: 98.3%) as underwriting profit more than doubled to £117m (2012: £48m).

The improvement came despite £60m of 2013 weather claims and the need to strengthen reserves in its commercial motor book, which pushed the COR in that line of business to 112% (2012: 106%).

The company said: “Despite a stormy end to 2013, the UK results benefitted from relatively benign weather over the whole year.”

The company expects a further £60m of claims from the storms and flooding in January and December 2014.

Commercial performance

Aviva’s UK GI commercial motor book was the only line with a deteriorating COR in 2013. The company said that the six-point CO deterioration was caused by “unfavourable prior year development”.

Commercial property, meanwhile, returned to underwriting profitability. Its COR fell 11 points to 90% in 2013 from 101% in 2012.

However, commercial lines overall still made an underwriting loss – though a smaller one. The overall commercial COR dropped to 102.9% from 104%.

Group chief executive Mark Wilson said: “Motor’s been the most volatile line, it goes up and down quarter by quarter. We come in and out of the sectors a little bit depending on the rates. But commercial motor has certainly hardened over recent months.”

Personal performance

Personal lines also improved their underwriting performance. Aviva’s UK personal motor COR improved by one percentage point to 96% (2012: 97%).

Aviva’s UK home business fared even better: its COR fell six points to 87% (2012: 93%).

Overall, the personal lines COR improved by 1.4 percentage points to 92.9% (2012: 94.3%).

Cash flow improvement

The UK GI division as a whole contributed £347m of cash to the group, more than double the £150m it contributed in 2012.

Aviva said the increase was mainly caused by the divisions simplified legal structure and the reduction in the inter-company loan  that Aviva’s UK legal entity, Aviva  Insurance Limited, extends to the group.


Aviva UK GI COR breakdown (%)

Personal motor9697
Total personal92.994.3
Commercial motor112106
Commercial property90101
Total commercial102.9104
Overall total9798