‘Disappointing’ result triggered by weather claims and shrinking book
The Co-op will embark on a turnaround plan for its general insurance business in the second half of 2014.
The company announced the plan along with its first half 2014 results, which showed that the general insurance division made an operating loss of £6.8m.
This compares with an operating profit of £28.8m in the first half of 2013.
The combined operating ratio jumped by 12.5 percentage points to a loss-making 108.7% from a profitable 96.2%.
Weather claims in the first half of 2014, as well as shrinking business volumes, were blamed for the loss.
Sales of £188.7m were reported by the general insurance division in the first half of 2014, down 23% on the £244.5m of sales it reported in the first half of 2013.
The company said it had anticipated the reduction, caused by the division being in the early stages of its repositioning within the Co-op group and a lack investment in the business before it was legally separated from Co-op Bank.
The Co-op tried to sell its general insurance business in 2013 as part of a plan to shore up Co-op Bank’s balance sheet, but announced in January 2014 that it would keep the business.
Co-op insurance chief executive Mark Summerfield said: “While contraction of our business was anticipated in 2014, these results are disappointing and reflect both the competitive market and the lasting impact of a sustained lack of investment prior to our business being legally separated from The Co-operative Bank in late 2013.”
He added: “The Co-operative Group’s decision to retain our business in early 2014 is testament to our underlying potential to develop our business. Though our turnaround remains challenging, work is underway to re-position our business and determine its strategic direction as part of the Co-operative Group.
“Our focus is to complete a review of our business and establish a plan that will lay the foundations for future development as a distinctive, member-focused insurer that treats customers fairly and does the right thing. Once this review is completed, work will be undertaken to deliver the required investment to support these plans.”