Company no longer seeing deterioration of prior year claims reserves, says Evans
AXA’s loss-making personal lines motor book should return to profitability next year as a result of the recent pruning, which has cut the portfolio by 23%, says AXA UK and Ireland chief executive Paul Evans.
Evans says the current year combined ratio for AXA’s UK motor book, which excludes the impact of prior-year reserve movements, has improved to 100.1% in the first half of this year from 101.7% last year.
Evans told Insurance Times: “I expect the improvements we have taken to be earned over the period of this year and next. I am expecting the book to return to profitability next year, as it takes so long for the benefits to come though.”
He added that while deterioration of prior-year claims reserves had been a feature of AXA’s UK motor results for the past two years, this was no longer the case. “We are seeing an improvement in performance and most importantly we are no longer seeing deteriorations in prior-year reserves which have distracted us in terms of whether we have had the right prices or not.
AXA’s group first half results, released this morning, revealed that UK direct gross written premiums had dropped by 29% as a result of ‘portfolio pruning’. Evans said this action cut the personal lines motor portfolio by 23%. The cuts were mainly made in parts if the country with high claims-farming rates, such as the North West, and in its young driver portfolio.
“As we had grown very fast, particularly in Swiftcover, we had business in postcode areas where claims farming is way more aggressive than others where we had to take action to reduce our exposure to fraudulent personal injury claims,” Evans said. “We have seen poor performance in our young driver book so we took action to reduce the scale of our young driver book.”
While the cuts are complete, Evans stressed AXA would continue its efforts to reduce claims costs. “We will be working very hard to ensure that we are competing aggressively to manage down our claims costs,” he said.