Reserve release boosts Covéa Insurance profit
Covéa Insurance has almost tripled its profit before tax in 2016 – its first full year of trading since integrating its purchase of high net worth insurer Sterling.
Profit before tax at the UK insurer jumped almost 200% to £38.4m in 2016 from £12.9m in 2015. The company said the main reason was the release of its claims equalisation reserve following the introduction of Solvency II, which added £29.8m to the profit, as well as an increase in the market value of its investment portfolio.
This benefit offset a £6.2m bill from the cut in the Ogden discount rate and a higher-than-expected level of claims inflation in the personal lines business, notably in vehicle repair and escape of water claims.
The combined operating ratio was almost unchanged at 96.2% (2015: 96.9%).
Gross written premium jumped 41% to £666.3m (2015: £473m). Covéa said the increase was down to the inclusion of the Sterling business and the development of the Provident Insurance direct motor operation.
It said it had achieved underlying growth in the majority of its personal and commercial lines activities.
Covéa Insurance chief executive James Reader said: “It’s pleasing to be able to announce that we delivered an increase in both written premium and profit in 2016.
We’ve faced a number of headwinds, particularly in respect of the Ogden rate change and higher than expected levels of inflation on certain types of claim, but we continue to respond positively and maintain our focus on delivering a great service for our customers and broker partners and sustainable profitable growth for our business.”
He added: “I’m very confident that we are well placed to keep delivering profitable growth across all our lines of business over the coming years.”