Insurer has slashed its private motor book by 60%
Lloyd’s insurer Brit has made cuts to its UK book amid difficult market conditions, but one equity analyst believes some of the cuts are the fault of the insurer’s own pricing rather than general trends.
Brit made an after-tax profit of £67.4m in the first half of 2010, compared with a loss of £6.3m in the first half of 2009. This was despite a 13.4% reduction in gross written premium to £851.5m from £983m.
The firm’s overall combined ratio worsened to 96.5% from 93.8%, of which 7.1 percentage points are due to the Chilean earthquake. But, from an underwriting perspective, the UK was Brit’s worst-performing division. The other two divisions, reinsurance and global markets, both reported combined ratios of below 100%, but the UK division’s combined ratio increased to 100.5% from 98.3%, with an underwriting loss of £1.6m.
Brit revealed that it had cut its UK private motor book by 60%, because it no longer considers it a sustainable class of business, and exited local authority business. Brit chief executive Dane Douetil said that, at its peak, private motor made up 11% of the UK business, or £40m GWP. It will account for £13m-£14m of premium this year, and “probably less” next year, he said.
Panmure Gordon analyst Barrie Cornes said: “Douetil’s description of the UK motor insurance market was quite cutting, but I think it is a case of Brit getting their pricing badly wrong rather than there being major fault lines in UK motor.”
KBC Peel Hunt analyst Christian Stobbs laid the blame at claims inflation. “The UK motor market has been through a disastrous couple of years and everybody has had a bad experience from it,” he said.
Brit released £41.9m of reserves in the first half of 2010, compared with £19m in the first half of 2009. Douetil described the release as “bang in line with the type of releases we have been making over a long period of time”, pointing out that reserve releases averaged £73m a year between 2005 and 2009.