But life cover is up and insurer will grow this year with new products, says chief executive
Fortis will continue to diversify beyond its core motor portfolio following a tough 2009 that saw profits plummet 62% to £29m from £76m in the previous year, and combined operating ratio deteriorate to 98.9% from 92.2%.
The insurer, soon to be rebranded as Ageas, blamed the poor performance on tough conditions in the motor market and the wider economy, and increasing claims costs.
Like other motor insurers, Fortis has been hit by the rise in bodily injury claims, the result of claims farming. The insurer also highlighted an increase in claims resulting from severe weather events and escape of water claims.
Chief executive Barry Smith pointed to growth in other areas, including its life operation, launched in 2008, which now has new annual premiums of £15m.
Meanwhile, the insurer continues to grow its commercial lines business, with commercial gross written premium increasing 35% in 2009 to £102m. Across the general insurance business, GWP hit its highest-ever level at £805m, up from £760m in 2008.
Smith said Fortis would diversify and grow this year, with new commercial products and extended electronic distribution on the cards.
The insurer also has a major affinity partnership with Tesco.
Private motor currently accounts for 51% of Fortis’s premium income. Smith said it could drop below this level as the group grew. “We have to move with the market,” he added.
Meanwhile, the company has taken action to improve the profitability of its motor book. Managing director Mark Cliff said that average rates had risen 21% in comprehensive private motor and 31% in non-comprehensive private motor. As a result of its rating actions, it dropped 100,000 policies. Cliff said: “The market has got a long way to go before it becomes profitable.”
Asked whether capacity needed to come out of the motor market, he said: “It already has. HSBC went into run-off last year and Zenith was acquired. That’s a good thing. It allows companies with the experience and the track record to move the market to where it needs to be.”
The firm’s new name will go to the shareholders’ annual meeting for approval at the end of April. If it gets the green light, it will be rolled out gradually in the UK by the first quarter of 2011.
MD sought for joint venture
Fortis is seeking a manager for its joint venture business with Tesco. The business – the name is yet to be announced – will work separately from the Fortis general insurance and retail businesses, with a separate management team reporting to chief executive Barry Smith. It is on track to launch in the fourth quarter of this year, bringing 1.5 million new motor and household customers with £500m gross written premium.
Fortis will recruit 550 staff to provide underwriting, product development and claims management, while Tesco provides marketing and distribution. A Fortis spokesman said: “As previously reported, the new company will be owned by Fortis and Tesco Bank. We are in the process of jointly recruiting the executive management team and, likewise, the board will represent the ownership of the company.”