Insurer returns to underwriting profitability, but gross written premium falls
The Co-op’s general insurance business made an operating profit before tax of £33.6m in 2013, more than 10 times the £3m profit it made in 2012.
The improved result was driven by the insurer’s return to underwriting profitability. It reported a 99.7% combined operating ratio (COR) in 2013, a 10.8 percentage point improvement over 2012’s loss-making 110.5%.
The better COR was thanks to a 17.2 point improvement in the loss ratio to 69.4% (2012: 86.6%).
This was despite a 20% reduction in gross written premium (GWP) to £443.6m (2012: £555.7m).
The Co-op said the improvement was “due mainly to better claims experience compared to the prior year, more than offsetting the impact of the fall in premium income and the significant reduction in investment income”.
It added: “The result is driven by the continued strong performance of the home portfolio, supported by markedly improved profitability in the motor portfolio.
“Key successes include our award-winning service, improved underwriting performance and increased customer reach, owing to our brand campaign and appearance on aggregator, or price comparison websites.
“We will continue to grow our business around our core proposition of fairness and we believe our general insurance business can build on its current success and has considerable future potential.”
The Co-op had planned to sell its general insurance business as part of the plan to shore up the troubled Co-op Bank’s finances.
However, the company has since cancelled the sale.
The company said in its annual results: “As the scale of the bank’s capital shortfall became clear, it was decided that the proceeds of the sale [of the general insurance unit] would be used as part of the group’s contribution to the bank’s refinancing.
“Following the recapitalisation, however, we were able to review our plans and we decided to keep this profitable business.”