Co-op insurance reports underwriting loss and 104.6% COR
A £25m drop in reserve releases has pushed Co-op Insurance deeper into loss in the first half of 2017
The motor and home insurer this morning reported an operating loss before tax of £15.5m in the first half of 2017 up from the £8.6m loss in the same period last year.
The cut in reserve releases pushed the company into a £7.6m underwriting loss from a £3.9m profit.
The first half 2016 motor result benefited from “significant releases” of bodily injury claim reserves, which did not recur to the same extent in the first half of 2017, and the company also has to strengthen prior year home reserves for subsidence claims.
The reduction in reserve releases added 11.9 percentage points to Co-op Insurance’s combined operating ratio (COR), pushing it to a loss-making 104.6% from a profitable 97.7%.
The motor COR increased by 0.7 percentage points to 107.1% (H1 2016: 106.4%), while the home COR was up by 3.6 points to 86.8% (H1 2016: 83.2%).
Also contributing to the underwriting loss was a £2.2m bill for quota-share reinsurance cover designed to reduce the company’s exposure to insurance risk.
The quota-share purchase has boosted Co-op Insurance’s Solvency II coverage ratio to 156% from 148%.
Co-op insurance said that the lower reserve releases and reinsurance bill masked an underlying improvement in underwriting performance.
Its current year COR, which excludes prior-year reserve movements, improved by 5.1 percentage points to 105.7% (H1 2016: 110.8%).
The company also grew gross written premium by 4% to £251.5m (H1 2016: £241.6m).
In addition to the underwriting loss, the company continued to pay transformation costs as part of its overhaul.
The company spent £10.3m on its transformation programme in the first half of 2017, down from £15.2m in the same period last year.
Co-op Insurance announced in July that its IT upgrade had hit delays after technology giant IBM pulled out of the project.
The company gave no further update in the results, but said: said: “Co-op Insurance remains committed to transforming the business to meet the needs of our 1.4 million policy holders with alternative plans now in progress.