COR improves to 98.9% but revenues drop 1% because of selective underwriting
AXA UK’s general insurance business returned to underwriting profit in 2013, reporting a 98.9% combined operating ratio (COR) for the full year.
This was a 2.3 percentage point improvement over the 101.2% the business reported in 2012, which came despite reserve strengthening adding 0.8 percentage points to the 2013 COR.
AXA UK and Ireland overall also boosted underlying profit by 32% to £178m (2012: £134m).
However general insurance revenues fell 1% to £3.7bn (2012: £3.8bn) as the company turned away business because of falling rates.
AXA UK and Ireland group chief executive Paul Evans attributed the better results to improvements across the board at AXA UK.
He said: “In 2010, AXA UK launched a business transformation to reposition our product offering to better serve the needs of both our customers and brokers while improving the cost efficiency of our operations.
“This transformation is progressing ahead of expectations, with underlying earnings increasing by 32% to £178m in 2013 thanks notably to significant improvements in profitability across commercial and personal Lines, and the wealth management business.”
AXA UK’s current-year COR, which excludes reserve movements, was 98.1% in 2013. This shows that prior-year reserve strengthening added 0.8 percentage points to the all-year COR.
This is an improvement over 2012, when the need to strengthen reserves added one percentage point to the COR.
AXA strengthened liability reserves in 2012 because of rising industrial deafness claims, which Evans described at the time as “the new whiplash”.
AXA attributed the COR improvement to “maintaining pricing discipline in markets where premiums have fallen ahead of improved claims experience, particularly in home and motor”.
AXA’s group results show that UK and Ireland brokered personal lines revenue fell by 10% to €1.9bn (£1.6bn).
Within this, motor revenue was down 5% to €530m because of rate softening in the UK and price competition in Ireland.
Direct motor revenue in the UK fell by 5%.
Brokered personal lines property revenue was down 23% to €476m, mainly because of rate increases affecting volumes and AXA exiting unprofitable schemes in the UK.
However, brokered UK and Ireland commercial lines revenue increased 9% to €2bn.
Within commercial lines, motor was up 9% to €395m, mainly due to “strong new business” and higher client retention in the UK.
Commercial property revenue was up 11% to €535m because of rate increases and strong new business.
AXA UK reported an overall UK commercial revenue increase of 11%.
AXA UK noted that the weather had been comparatively benign in the first 11 months of 2013. However, the company said the storms in December returned the cost of weather events back towards the long-term average assumed in AXA’s pricing.
Evans said: “Handling the aftermath of dreadful events such as the current floods is exactly what we do.
“Providing excellent customer service to those affected is a priority for our business today and will remain so in the coming months until each of our customers has returned to their restored home. The immediate priority has been to get people into safe accommodation with the emergency cash they need to deal with any immediate necessities. Once the flood waters recede, we will be there over the coming months to help our customers rebuild their lives and return to their homes as soon as possible.”