Profit improvement driven by both personal and commercial lines
Zurich’s UK general insurance (GI) business will be able to maintain the momentum it enjoyed in the first half of 2014, according to interim chief executive Dave Smith.
The business boosted gross written premium (GWP) by 2% to £841m (H1 2013: £826m) at a time when many of its rivals, including RSA and Aviva, are shrinking their premium income.
Zurich had been shrinking its book to restore profitability, but is back in growth mode.
Speaking to Insurance Times about the results, Smith said: “We would hope to continue that type of performance through the rest of the year.
“It is not huge growth. If we were growing by 10 or 15 points, as we have seen some people grow in certain areas, that would worry us, because that would tend to mean that you are underpricing to gain that market share.
“Ours has been slow and steady growth and we think it is absolutely sustainable.”
Smith added that Zurich’s personal and commercial lines divisions had both enjoyed rate increases of between 4% and 5%.
Zurich’s UK GI business had a good first half. As well as growing GWP, the company boosted operating profit by 9% to £88m on the back of a three-point improvement in its combined operating ratio (COR) to 95%.
Smith said the improvement was particularly pleasing because it was achieved despite weather claims of around £35m and reserve strengthening for old deafness and mesothelioma claims of around £25m.
The improved underwriting profitability was mainly driven by a three percentage point improvement in the attritional loss ratio, which excludes catastrophes and large single losses.
Smith said the improvement was a result of previous efforts paying off. He said: “It is the hard work over two or three years in terms of risk selection, underwriting and getting the basics of the business right.”
He said the improvement was being seen in both personal and commercial lines, and that both divisions reported a profitable COR that was “very similar” to the 95% reported for the division as a whole.
The Endsleigh effect
Smith added that the work to integrate Zurich’s personal lines business with broking subsidiary Endsleigh is already bearing fruit.
He said: “We are in the early stages of the integration of the best of Endsleigh and the best of Zurich. But we are starting to see the benefits.”
He said that growth in Zurich’s intermediated personal lines business had offset the reduction caused by Zurich pulling its own-branded products from price comparison sites.
Smith declined to specify the exact amount of GWP lost by withdrawing the products from aggregators, but said it was in the tens of millions of pounds.