Discount rate cut has ‘minimal impact’ on Ecclesiastical UK profit
Ecclesiastical’s UK and Ireland business made an underwriting profit of £25m in 2016, more than double the £11.6m it made in 2015.
The specialist churches and charities insurer reported a UK and Ireland combined operating ratio (COR) of 82.5% – almost 10 percentage points better than 2015’s 92.3%.
The main reason was a lower level of weather claims in 2016 than the previous year. Ecclesiastical said that the flash floods in June 2016 were unexpected but “significantly less costly” than the storms that hit the UK at the end of 2015.
The company also reported that the cut in the personal injury discount rate to -0.75% from 2.5%, which has hit other insurers hard, had had a “minimal impact” on its results.
It said this is because its UK motor business is at an advanced stage of run-off, and its liability portfolio, which includes employers and public liability, is less sensitive to the discount rate because the insurer has a low frequency of catastrophic injury cases.
Ecclesiastical’s UK gross written premium (GWP) fell 3.4% to £220m (2016: £228m) against a background of high competition in UK commercial lines.
The company said the main downward pressure on growth had come in the education sector where the company said it had faced continued pressure from the Department for Education’s risk protection arrangements for academy trusts.
It said growth had also been hit by the “very crowded” household sector where the company is focusing on writing profitable business over growth.
Ecclesiastical’s UK profit was one of the main drivers for improved performance at group level.
Ecclesiastical’s group profit before tax was up 17% to £62.5m (2015: £53.6m) and the COR improved by 3.4 points to 89.8% (2015: 93.2%)
Gross written premium was up slightly to £310.1m (2015: £308.2m) mainly down to currency gains.
Ecclesiastical chief executive Mark Hews said: “I am pleased that the transformation of our business has resulted in strong results in 2016, reflecting the consistent financial performance we have achieved over the last three years. We have delivered this through applying strong underwriting disciplines and managing our exposure to risk tightly.”