Churchill affirms turnaround with £77.6m 2011 profit

Direct personal lines insurer Churchill swung to a £77.6m profit in 2011 from a £53.3m loss in 2010, a Companies House filing reveals.

The insurer, part of Direct Line Group, slashed its combined ratio by 14 percentage points to 103% (2010: 117%) as its loss ratio fell to 71% (2010: 89%).

The turnaround came despite a 12% drop in gross written premiums to £992m (2010: £1.1bn).

The improvement was mainly caused by a 29.5% drop in net insurance claims to £680.6m (2010: £965.5m).

Expenses were flat at £309m. While Churchill cut commission expenses by 11% to £134.6m (2010: £151m), this was offset by a 10% rise in marketing and administration spend to £174.5m (2010: £158m).

A breakdown of Churchill’s business lines reveals that the bulk of the improvement came from the company’s personal motor book. The personal motor net loss ratio dropped to 95% in 2011 from 128% in 2010. Personal motor accounted for 48% of Churchill’s 2011 net earned premium.

The residential property business loss ratio remained static at 54%. Residential property made up 45% of Churchill’s 2011 net earned premium.

The assistance business saw its net  loss ratio drop to 24% from 31%, while the loss ratio in Churchill’s ‘other’ business jumped to 19% from 7%.

As with Direct Line Group’s other underwriting divisions, Churchill’s assets and liabilities were transferred to sister company UK Insurance in December last year. The Churchill legal entity is now in run-off.